Investors are suffering from Howie Mandel's "Deal or no Deal syndrome:" You never know what's next, the banker is always against you and models (Wall Street puppets) can't give any profitable tips. Read this article to find out when to hold'em and when to fold'em. Aside from the one million dollar price, investing in the markets has been somewhat like contending on Howie Mandel’s Deal or no Deal. Wall Street analysts and economist have given investors about as much profitable guidance about where the market’s going as Howie’s 26 models about where the million is hidden – none!
Unlike Howie’s guests, investors “play” with their own money, they have “skin in the game.” This market meltdown translates into more than just a few less cases (and ladies) to choose from. This is serious stuff, stuff that affects everyday life.
Unlike Howie’s contestants, each and every one of us knows how much our case of money (portfolio) is worth. The question is, should we cash in and protect what we have or “gamble” for higher values?
Today’s Wall Street “models”
Economist and Wall Street were just as baffled by the market meltdown as Jim Cramer and the likes who insist that nobody could’ve foreseen this turn of events.
At this point though, there is nothing we can do to undo the S&P’s (NYSEArca: SPY) and Russell 1000’s (NYSEArca: IWB) 50%+ top-to bottom drop. Rather than raising sunken ships to calm the storm, let’s fortify our ships. In other words, what did we learn that will protect our life savings in the future?
First and foremost, we need to remember not to allow our judgment to be clouded by complacency. As this rally continues, investors will grow more confident about a continuation of this rally. This entitlement of profits to come was the exactly sentiment that led to the post October ’07 meltdown. Be aware of a repeat!
Dr. Doom turns soft
In September 2006, Mr. Roubini, one of the few and probably the most popular economist who early on saw the writing on the wall, said that the United States was likely to face a once-in-a-lifetime housing bust, an oil shock, sharply declining consumer confidence and, ultimately, a deep recession.
- The 10 most recent bear markets have bottomed out down 20% to 57% off the peak. As for the current market, it is the worst seen since the Great Depression, which posted a decline of 89% from its peak.
- The bear phases lasted anywhere from three to 30 months; we are in month 17. The Great Depression, lasted 30 months.
- Most the markets offered some sort of retest of the low, but some didn’t.
- The S&P 500 is trading about in line with its long-term price trend after 15 years of trading above it and is likely that it will continue to trade below trend for a considerable period of time.