Saturday, October 18, 2008

Investment Strategy a la X Files: Question Everything

I did my usual tour of Saturday morning information. I listened to Gary K, stopped by Financial Sense OnLine, read Ray Merriman's weekly geocosmics (he reminds that Mercury's retrograde shadow remains until the 31st!)!  I also visited Roger Nusbaum's Blog.  I've not been to Roger's blog in a while.  I used to be relatively active there, and I thought that Roger was always an even-handed commenter on the market.  He still is.

As I mentioned in an earlier post, I felt that we were perhaps coming to some sort of divergence between conventional wisdom and reason.  Accordingly, I'm going to dub this new era of thinking about the Market as the X Files era where we must indeed question everything.

Fear, uncertainty and doubt (FUD) are very powerful motivators in driving our behavior.  At some point in time you have to know when to put those FUD's behind you--or assess that the FUD probability risk factor (FUDprf) indicator is low enough for one to assume some risk. 

If I were a clever gal, I'd write a book called FUD Proof, An Innovative Guide to Investing in Uncertain Times.  Naturally, it would be a shameless rip off of Crash Proof...but .....

I'm somewhere between the space of abject fear and cautious optimism. I'm still going with my deflation prior to inflation theme.  And I think that it is useful to remember Marc Faber's observationi of the large lag time between economic reality v. the market's perception of economic reality. 


Anonymous said...

1. Filled with confusion or bewilderment; puzzled.
2. Full of complications or difficulty; involved.

This honesty and lack hubris is refreshing.

We are not in charted waters. Anyone who says we are is smoking something. Our markets and financial system is based on faith and trust. We have all lost faith in everything except a government guarantee. The way back is "full of complications" and "difficulty."

Without a government guarantee, banks do not trust each other to repay loans, and even then trust is still lacking. Perhaps they are even wary of some sovereign failures. Corporations need credit to conduct everyday business. Banks are not willing to extend new lines of credit because they do not trust that the loans will be repaid. Many corporations that have existing lines of credit will face armageddon at the expiration of the credit line or the failure of the bank.

The markets are highly volatile for a very fundamental reason. Many purchases are and will continue to be tentative, short term (hours) and small - designed to capture quick trading profits.

Some individuals are being led into long term stock investments by Warren Buffett's out of character disclosure of alleged stock buying and by some bloggers who claim that they are not confused and that they possess sufficient foreknowledge to predict a near end to the bear spiral in stocks, commodities (particularly gold) and in the economy. Many people have already been severely damaged, and many others may be. Many previously predicted bottoms are far above todays levels. Todays levels may be far above the final lows.

IMO the current situation is not conducive to building a final bottom. Several temporary and short lived bottoms, yes. A final bottom, no.

Good luck.


Anonymous said...

Lessmore, I agree with your comments, that in this abnormal environment, one should be prudent with one's precious capital above all else. There is absolutely no good reason that some bloggers should be giving out free but incomplete investment advice to encourage people to buy with confidence. If one has been smart enough to maintain a high cash level, then perhaps just take a small step to test the water. But buy with confidence is an inappropriate advice, in my view.



russell1200 said...

We were both over at Rog's there for a while. He very clearly fit within the "bell curve" works mentality, and I got a little tired of the cheer leading. That being said, he is far more polite and cautious then many others out there.

I disagree that it is anymore important to question everything now than it was before. A lot more people would be happier now if they had done more questioning then.

Per the other comments. I agree. In what is clearly in the short term a deflationary environment, I don't understand the need to try and time the bottom.

Anonymous said...

Check out Mark Cuban's blog:

Yeah, it's the Dallas Mavericks Cuban...but he has some interesting things to say about the market.

sysin3 said...

gosh-darnit Leisa,

I think you mentioned a while back on Rev's blog that your unruly fingers are now randomly substituting homonyms for the intended words.

Well, you done flung it on me. I hope you're (your) happy , lol ;-)

Leisa said...

Sorry to not be adding comments, but I'm vacationing!

Leisa said...

Sysin---That means that you are an old fart!

Russell: I think that questioning everything is important at all times. I was bearish long before most. In fact, I had a reader ask why I thought there was going to be a recession v. when others were not calling for one. (My estimate was by end of Spring 2008--I think that I'll be vindicated!)

I was called by one reader, a "recessionista". Sigh. There are benefits to being a nobody!

sysin3 said...

sigh, more guilty than the charges, your honor ;-)