HOLY SMOKES : Did i read this right? Dow below 10,000 S&P;1,100 Nasdaq 1500. Is this possible by October?

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[quote author="IrvineRenter" date=1224761443][quote author="muzie" date=1224574499]Is everybody still trying to call a bottom/2nd crash of armageddon?



I think the short story's done for a little while. Probably won't be a raging bull either.



I'm just going to sell calls against my long positions here. The VIX is still so high, I'd need a 15% drop before I lose a single dime on the covered call position I sold, and a sideways/rising market will hand out a hefty 7-10% premium for barely a month of holding.



So worse case we crash another 20% and I lose about 5% after the premium, and best case I collect a large premium. Rinse & repeat, until the VIX dies down to less freaky levels.</blockquote>


I was thinking about your comment today... Have you looked in to futures on stocks? You could sell a futures position against your stock position and obtain the same downside protection without all the option premium. Of course, you give up all upside as long as you are in the position, but it is a far cheaper source of downside protection.</blockquote>


IR, it is my understanding and experience that when you sell covered calls, you are the one keeping the premium. Covered calls are one of my fav strategies, and my father still makes a living with them.
 
Just had to share an article by my favorite financial commentator:



<a href="http://www.safehaven.com/article-11645.htm">Paul Kasriel</a>
 
awgee, those are great charts. i think looking at japan over the last 20 yrs is a great comparison to what we may experience here. the question that will make or break us is this just another recession, albeit a deep one... or do we start rewriting the basic portfolio theory of the last 50 yrs. "i'm holding for the long run" has always been a defensible argument to fall back on. heck, it's the only thing that keeps people from an even greater panic. now if you look over the last 10 yrs that argument barely holds up.



to think, you could have bought a 30 yr savings bond in the mid 80s with a 13% yield... and still have several yrs left on that bond.
 
[quote author="acpme" date=1224804113]awgee, those are great charts. i think looking at japan over the last 20 yrs is a great comparison to what we may experience here. the question that will make or break us is this just another recession, albeit a deep one... or do we start rewriting the basic portfolio theory of the last 50 yrs. "i'm holding for the long run" has always been a defensible argument to fall back on. heck, it's the only thing that keeps people from an even greater panic. now if you look over the last 10 yrs that argument barely holds up.



to think, you could have bought a 30 yr savings bond in the mid 80s with a 13% yield... and still have several yrs left on that bond.</blockquote>
That's if the bond wasn't called.
 
Get your scuba gear on. Market looks like it wants to test those lows

of a couple weeks ago. Its "diving" time again as we head to the close.

I just dont have the guts to short this volatility.
 
[quote author="bltserv" date=1224810286]Get your scuba gear on. Market looks like it wants to test those lows

of a couple weeks ago. Its "diving" time again as we head to the close.

I just dont have the guts to short this volatility.</blockquote>
Works for me, I'm still long on my Dow and S&P puts...declining market + increasing volatility = win-win for put options. Are we gonna see the Dow hit below 8000 today or tomorrow?
 
[quote author="acpme" date=1224809327]why'd u have to ruin my hindsight arbitrage??</blockquote>
Haha...couldn't help myself. Believe me, if I was smarter and luckier I'd be a rich man today...ohh wells.
 
Anyone look at the Home builders today? KBH, TOL, BZH, CTX, PHM, HOV, LEN?



I think a couple of these names will not be around in 6 months. I think rolling over their debt might be the big issue here.
 
debt rollover is a huge issue in general. companies with any significant amt of debt maturing in the next yr or two are getting hammered.
 
WOW

My Ultra Short SRS looks like a rocket to the moon.

Up $ 30.00 at one point today to 188.



Lots of new 52 week lows for the Housing Sector.

Lennar is in the 6`s. Ouch.

HOV at $ 3.55



These guys are getting crushed.
 
[quote author="usctrojanman29" date=1224805051][quote author="acpme" date=1224804113]

to think, you could have bought a 30 yr savings bond in the mid 80s with a 13% yield... and still have several yrs left on that bond.</blockquote>
That's if the bond wasn't called.</blockquote>


actually i just looked it up since i know next to nothing about savings bonds, but looks like they aren't callable. anyone got a time machine?
 
[quote author="bltserv" date=1224815189]WOW

My Ultra Short SRS looks like a rocket to the moon.

Up $ 30.00 at one point today to 188.



Lots of new 52 week lows for the Housing Sector.

Lennar is in the 6`s. Ouch.

HOV at $ 3.55



These guys are getting crushed.</blockquote>


And I was soooooooo close to buying some SRS puts when it hit 180. Closed at 158. This market is crazy
 
[quote author="acpme" date=1224804113]awgee, those are great charts. i think looking at japan over the last 20 yrs is a great comparison to what we may experience here. the question that will make or break us is this just another recession, albeit a deep one... or do we start rewriting the basic portfolio theory of the last 50 yrs. "i'm holding for the long run" has always been a defensible argument to fall back on. heck, it's the only thing that keeps people from an even greater panic. now if you look over the last 10 yrs that argument barely holds up.



to think, you could have bought a 30 yr savings bond in the mid 80s with a 13% yield... and still have several yrs left on that bond.</blockquote>


For me, "holding for the long run" is not an investment strategy. I invest with the long term results in mind, because long term trends are much more reliable, but not just because it is the long term. I think it is just as easy to lose money in the long term as it is to make money in the long term if your criteria is based on how long one holds.



I have an exit strategy for my long term holds. And I had it before I entered into the trade. I think folks get confused with reliable long term trends and a buy and hold philosophy. If one had bought held gold from 1980 until 2001, one would have lost money and purchasing power. If one had bought and held equities from 1998 until 2008, one would have lost money and purchasing power. But, I bought gold in 2005 and will hold for at least a couple more years probably.
 
[quote author="optimusprime" date=1224813157]Anyone look at the Home builders today? KBH, TOL, BZH, CTX, PHM, HOV, LEN?



I think a couple of these names will not be around in 6 months. I think rolling over their debt might be the big issue here.</blockquote>


I thought rolling their debt would be an issue also, but do you think the Fed will now guarantee their paper?
 
<blockquote>For me, "holding for the long run" is not an investment strategy. </blockquote>


Agreed. That is why I day trade. I buy, set a target, and sell.



(Day trading doesn't always mean "day" it can be a transaction lasting seconds, or sometimes weeks to months. Holding 1+ year is where I draw the line from short-term to long-term investing.)



Adding to this. I just talked to someone about real-estate. He is a friend of mine that wants to buy a second home for investment purpose. My heart sank. I told him it makes no sense to buy a home for investment purpopse because even if homes stabilize in about 3-4 years, they will grow extremelly slowly probably not even covering inflation. There is even a chance that we are entering deflation, so thats even worse. He isn't convinced though, and his excuse is that he can hold it long term and probably double his money. What he doesn't seem to get is that purchasing power today won't be the same tomorrow.



As far as the stock market, eventually we will stabilize. But I think we will enter a period of sideways trading for a decade if not more. A time will come where selling covered calls on divident paying stocks will be a good way of making money.
 
but you guys are hardly the avg investor and basically reaffirming my thought. basic portfolio theory says stocks > bonds > risk-free. over the long-term, however you define that, you weight more heavily from left to right, set it and forget it. but what if the risk-reward relationship is completely wrong?



bill gross had been pounding the table against stocks outperforming bonds for the past decade, although he obviously has an axe to grind. but warren buffet said the same thing continually since 1999, that is until last week. given recent events, certainly there are now people who have invested in stocks over 5, 10, 15, or 20 yr periods and not outperformed other asset classes. baby boomers in japan nearing retirement have found they've gotten no gains in the stock mkt over their working life.



the basic tenents of portfolio allocation we've all accepted were created in the late 1950s. now that we're adding another 50 yrs of data, are we seeing that the theories still hold true? let's say BV's prediction of sideways returns for the next decade is correct (everyday this scenario seems more likely), would harry markowitz have looked at investment returns from 1900-2015 and come to the same conclusions as he did using 1900-1960? i know it's an overreaction to throw out 50 yrs of financial theory out the window based on what happened over the last 4 wks but it's an interesting thought.
 
I don't think Markowitz would have come up with the same theory using data we have today. I think even Buffet is confused and puzzled half of the time.



The difference between 1900-1995 from 1996-2008 is money flow (amount of it). An unbelievable amount of money has entered the market. 10-15 years ago people barely knew what a 401K was and today everybody is practically connected today. All this does is create more money supply that wasn't there before which led to inflated prices vs. steady growth.



This is what I was trying to explain a while ago in some other thread.

To make this easier to understand lets assume there is only 1 stock to invest in. Today there are 2 people investing in it through 401Ks or whatever. A new person just got a job, and they have a 401K and they have to invest money somewhere right? So money will be used to purchase this stock thus increasing its price (FAKE DEMAND, is how I view it). Did this company do anything different over night to be worth more? No...money supply just increased. Same happens when money supply decreases.



I mean same thing happend with the housing right? Money rushed in and ofcourse prices went up. People tried to argue that it was driven by demand. Well yes, the demand for houses was there...but it wasn't driven by true demand. It was driven by fake demand. So when the bubble popped, the true demand showed its face (actually it hasn't fully shown it).



Same thing happend in oil. Oil prices were driven to their high levels mainly by investors. Another bubble. Oil went from 150 to 70 a barrel in matter of months. Did America as the rest of the world all of a sudden drive their car half as much as before? Did the demand for oil really fall 50% in such a short time? Umm no.



Todays investing is driven by money supply more than anything. Money supply is driven by human psychology or rather the "herd mentality".



Only thing you have to do is follow the money supply or human behavior and you will be rich beyond your means. Spotting it before its late is the tough part.
 
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