The Sky is Falling! Ed’s Daily Portfolio Summary for October 7th   4 comments

Just a thought for you, but if you truly believe the U.S. government is in danger of a potential default, do you really think the indexes falling by about 0.90% covers anywhere close to the potential damage? Think again…

If you are wondering why I have been buying, it is because the recent market drops don’t even come close to the damage that a U.S. default would cause. The truth is the damage would be beyond most people’s conception of economic catastrophe. It would make the Great Depression look tame. Also, it would bring the value of everything down to somewhere around the value of “worthless paper”. On the other hand, if it doesn’t happen, and I believe it won’t (the “powers that be” have too much to lose if it does), the bounce back in the markets should be worth buying now.

Speaking of the markets, I beat the indexes today, although it was an ugly win:

GNW: -0.23 to $12.66 ( -1.78% , 35.11% overall)– bought at $9.37
IAU: 0.12 to $12.84 ( 0.94% , -1.91% overall)– bought at $13.09
MSFT: -0.58 to $33.30 ( -1.71% , -0.45% overall)– bought at $33.45
NDZ: -0.15 to $8.57 ( -1.72% , -0.92% overall)– bought at $8.65
NNVC: -0.34 to $5.21 ( -6.13% , 105.12% overall)– bought at $2.54
PVCT: 0.05 to $0.93 ( 5.68% , -10.58% overall)– bought at $1.04
SWHC: -0.11 to $10.49 ( -1.04% , -1.04% overall)– bought at $10.60 today
SYMC: -0.02 to $24.82 ( -0.08% , 0.40% overall)– bought at $24.72
TC: -0.06 to $3.38 ( -1.74% , -1.74% overall)– bought at $3.44 today
UNP: -1.17 to $152.73 ( -0.76% , -1.50% overall)– bought at $155.06
YHOO: -0.75 to $34.14 ( -2.15% , 27.01% overall)– bought at $26.88

OVERALL: -0.67%

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Posted October 7, 2013 by edmcgon in Economy, Market Analysis, Open Thread, Portfolio

4 responses to “The Sky is Falling! Ed’s Daily Portfolio Summary for October 7th

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  1. Ed,you are right about the default-scenario. It’s not just that I’m worried about. If USA defaults, consequences will be too big to predict. But, remember when the correction about the debt ceiling came in 2011 – after an agreement was made.
    As a second big risk, there is the ending of the four-year (on average) bussiness-cycle. If you look to the average, the stock-market is due for a bigger correction. I don’t think corporate profits will continue to be this high – there always has been a reverse to the mean at some point, probably it’s not different this time.
    You put a lot of faith in the Fed. The Fed made the dot-com-bubble (correction afterwards), and the housing-bubble (correction afterwards) with its cheap money. Now it has made a credit-bubble. Do you think it will be different this time and there will be no correction? You put a lot of faith in people who don’t care about you.
    There is much bullishness, low vix, non-confirmation on the S&P etc.

    • plas,
      Most of the conditions you mention have been in place since the start of the year. Still, the markets have run up. While I agree this is a bubble, I can’t ignore the first rule of the markets, which is “Don’t fight the Fed”. The Fed seems hellbent to increase this bubble, mostly because everything they are doing isn’t working.

      • True. But the market is about 20% higher compared to the start of the year. This is becoming a speculative bubble; smart money is exiting the market and you are entering. So, if you agree this is a bubble, I’m curious to hear about your exit-strategy (always eager to learn more). When will you exit the market, totally or partially? If Mike has learned me one thing, it is that you need and exit-strategy before you enter.

        And again, I have a different first-rule. I don’t care what the market things about rules. In the past year, that first rule been violated twice very hard, so I don’t take it as thé rule anymore, at least not in the short/middle-run.

      • plas,
        Remember, I have two portfolios: My 401k (long-term holds) and my IRA (short and medium term holds).

        The 401k will ride regardless of the bubble, unless I see something in the bubble which makes selling a specific position inside the portfolio prudent. In other words, if something about the bubble bursting changes the reason I bought one of those stocks in the first place, then i will sell it.

        My IRA is a different matter. If I see a macro condition which will impact my holdings, I will sell them, even if the macro condition is only short-term.

        Sometimes you have to ride out the bumps in the market. And so far, my first rule has been THE rule of the markets this year. At the moment, it looks like the Fed might even carry QE into next year.

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