Cash Is King: Major Market Correction Is On The Way - You'll Thank Me

Discussion in 'Stock picks and trading strategies' started by Jack24, Feb 12, 2007.

  1. Jack24

    Jack24 banned

    Get Defensive. Buy high quality, dividend yielding stocks in consumer staples, medical related companies, and other inflexible goods/services providers. Seek out high yielding money markets (5%+) and high quality bonds, including treasury notes.

    We will see a massive correction over the next year in the stock market. A minimum of 10%, and probably much more.

    1) Technical Analysis indicates we reached a triple top on the major indexes. We did so after 13 quarters of double digit earnings growth. That growth is now in the single digits, and by even most bullish analysts estimates, likely to decline and revert to historical means (7% approx).

    2) Stocks have P/E ratios now that are based on assumptions of continued double digit earnings growth. Should that assumption - which again, is arguably inherently flawed (see 1 above) - prove wrong, then stocks will be trading at far richer valuations than they are now. In other words, the P will get larger, and the E will shrink. You will then be stuck with a stock that will have to correct downwards to match a more normalized P/E ratio.

    3) Housing and lending will continue to act as a drag on the economy. In fact, it is probable that the lending and housing problems have not yet been felt in terms of consumer spending. I would argue that the meltdown has just begun, and that exotic mortgage fueled real estate market is on the verge of imploding.

    4) Consumers have saved negative amounts again this year, the first time negative savings rates were recorded two years in a row since 1929, and this can't continue forever, especially when they can no longer leverage equity from their homes to sustain continued consumption that is disproportionate to their income gains. This will correct. Simple math dictates it has to. Consumer spending accounts for 2/3rds of the economic activity of the U.S., which in turn drives growth in both developed (Japan, Germany) and emerging (China, Brazil, Thailand) markets.

    5) Inflation remains a huge risk. I would argue that inflation is understated (especially energy, rental rates, food, commodity prices [which get passed through])in all 'official' metrics. but it remains stubbornly high even by those official metrics. If rate hikes loom on the horizon, this will pose serious financial threats to consumer spending, corporate profits, and ultimately, the markets.

    6) Geopolitical risks remain high, especially in the case of Iran, Venezuela, Nigeria, Russia and North Korea.

    7) A fast rise of 18% in the U.S. markets over 6 months far exceeds the historical returns of approximately 8% per annum. On a per annum basis, that equates to 36% per annum, which is 4.5 times the historical average, fueled by above average corporate earnings growth which, again, is now slowing.

    8 ) Emerging markets are overheated by all objective valuations, and there is a high risks of further problems in these markets, which could very well threaten liquidity.

    9) The U.S. market has gone 1000 days, the longest stretch since 1954, without a true correction. Statistically speaking, this is an anomaly, and anomalies are not permanent.

    One does not always have to leave one's chips on the tables. This is especially true when all objective indicators can lay the foundation for the case to lock in profits and wait for a 'reversion to all averages' to set in, which would almost certainly lead to a market correction.

    Get defensive. Now is not the time to try and stretch gains. Wait for the inevitable correction. Pick your sweet spots. Don't rush into 'bull traps,' as the dips will not be buying opportunities, but a prelude of more pain to come.

    The liquidity excesses of the last 5 years will take a while to work off. Many people will lose much paper wealth during the impending correction.

    Protect your assets. Don't listen to 'gurus' or 'analysts' who have a vested interest, working on behalf of Wall Street, to ensure that people continue to churn their accounts, and ply dollars, either new or on a rotational basis, into markets that are set to correct. They don't care about you or your money. They only care about fostering a false sense of financial security to lure your hard earned dollars away from you, regardless of the how nasty the results are to your portfolio, so that they earn big bonuses.

    You don't have to play in a rigged game. Wait until the rules are reset (numerically), and control your own financial destiny. Be skeptical an suspect of every word that anyone involved in the investment profession blathers. Dissect every word. Trust nothing and no one.

    If you follow this advice, you will thrive will others get crushed.

  2. Luc1Grunt

    Luc1Grunt forum leader

    make money up, sideways or down. ING Orange still pays 4.5 APY......let me know if you want a referral and $25.
  3. aiki14

    aiki14 Well-Known Member won april/06 simulator won weekly contest 13x won feb/07 simulator won jan/07 simulator won nov/06 simulator won mar/07 simulator

    Jack you are one long winded dude. I have a slightly bearish outlook, and have been maintaining a fair number of protective puts, but the world is not coming to an end.
    Forgive me if I am wrong, but you really sound like someone who got seriously burned and is now on a crusade.
    If you believe all that, why not buy index puts or sell calls? Or take a broad group of short positions? Conquer the crash rather than run and hide.

    There's too much in your post for a point by point rebuttal and I believe a good portion of whhat you've said. However in the spirit of debate...

    When you say "We will see a massive correction over the next year in the stock market." aren't you doing just what you rag on Jim for doing? Making absolute statements? If you're wrong then what You'll be just like him.
    I don't see a triple top on the indices, I see a lateral move through trend lines, especially in the S&P weekly but no triple top.

    I think the single digit growth assumptions are more baked in than you seem to. Traders and Institutionals have been backing away from the high P/E for 2 quarters.

    I think inflation is a moderate to slight risk at least until/if we see the wage piece fall into your scenario.
    I don't see any of the geopolitical risk countries you name really moving the markets, unless a whole bunch of stuff happens at once. I will say if you're looking for trouble hidden, watch Taiwan as we move towards either the Olympics or the Worlds Fair 2 years later, note they changed the name of their postal service this week. (remember you heard it here first, Dr. Bob)(sorry, that's an inside joke).

    And the last thing you said, I believe, should read, "Follow this advice and at best break even while others get crushed". If inflation is as imminent as you say you're cash isn't gonna "Thrive".
  4. Luc1Grunt

    Luc1Grunt forum leader

    He's either Eagle or Bluestreak on ET. Sky is falling...might be two years from now, but even then it will be "I told you so". I remember this same attitude and "statistics" from May.....what a nice profitable run we have had since then!!

    I have to laugh at the constant predictions. Deal with what is going on now and use your noodle for the future. Noise...Noise,,,NOISE!
  5. bahroor

    bahroor Active Member weekly contest winner won dec/06 simulator

    bears like jackie here have been calling for a "major" correction for months now.. "watch out!", here comes the "Recession", "you'll thank me later"!

    I’ve been hearing that crap since november 2006, after the initial bullish run... ever since its been "correction time", blah blah blah, "I’m all cash", while the market is rockin' and rollin' making new highs over and over again.

    if these people would quit trying so hard to call a top and just go long they would have made a lot of money; but instead, they'll wait for a triple digit red day on the DOW and post a "told ya so!" thread.

    Jim summed it best here...
    What a hypocrite
  6. Jack24

    Jack24 banned

    Aiki - I am not saying which specific stocks will rise or fall, unlike Cramer. I'm saying there will be a macro breakdown, and it's already begun. It has much deeper and further to go.

    Luc - I don't even know what ET is. Is that the extraterrestial?

    bahroor - you're one whiny bitch. Take a pamprin and make sure you're not pregnant. Hormone fluctuations make girls moody and whiny, just like you are everyday, when they are pregnant.

    Everyone else:

    Stay long at your own peril. But I hope you thrive.
  7. bahroor

    bahroor Active Member weekly contest winner won dec/06 simulator


    blah, blah, blah "MAJOR CORRECTION COMING!!" hahaha
    so is the DOW going back to 11,000 by the end of the year jackie?

    it's not that you cant be wrong jackie, it's just that you're dumb, ignorant, insecure, annoying, and you're posting in the wrong forum...
    what happened to the "we hate Cramer forum"? done bitching over there hypocrite?

    i command you to post a nice comeback shortly jackie... make it creative and meaningful for a change… GO
  8. Jack24

    Jack24 banned

    I'll tell you where the S&P will be by December of 07. You tell me where it's going to be.

    Whoever is closer wins. Name the amount.

    How's that?

    All of Cramer's Mad Money Forums is watching.
  9. timsuha

    timsuha Member

    Gambling online again, watchtvg... i mean jack?
  10. Jack24

    Jack24 banned

    I'll take all bets. Put your money where your mouth is.
  11. bahroor

    bahroor Active Member weekly contest winner won dec/06 simulator


    fine, here's the deal..

    if (and believe me, that's a big if) you follow through on your previous bet, and I receive my prize no later than 2/20/07 by 4pm EST (that’s eastern time jackie), i will name new terms for this bet. and this time it will be a cash amount.

    i usually don't like to gamble on-line jackie since i gave up poker, but i'll make an exception for you.
  12. Jack24

    Jack24 banned


    How much money did you make on NEW!!!

    You had a buy rating on it, right??!!!!

    It's down another 6% today!

    Good call!
  13. bahroor

    bahroor Active Member weekly contest winner won dec/06 simulator

    lol, hey, if it gets you going then take your time.. or get a girlfriend.

    i never bought "new", know nothing about it or why its dropping, all i know is that you're wrong and will lose that bet.
    and you know it too jackie.

    what a waste of bandwidth talking to an idiot... have the last word jackie, im out
  14. Jack24

    Jack24 banned

    Yeah, you're "out" because you were implying NEW was done dropping in that thread. You weighed in on that NEW thread even though you now claim you knew "nothing" about it.

    I put my money where my mouth was. I said it would drop much further, which IT DID.

    What does that say about you, bahrwhore?
  15. Albert0373

    Albert0373 forum leader won weekly contest 8x won sept/07 simulator won feb/09 simulator won july/08 simulator won oct/07 simulator won june/08 simulator

    This is great :D finally some forum action; let's see those bets boys.
    I'm not taking sides, just gonna stay on the sidelines =]
  16. clavocat

    clavocat Member won weekly contest 2x

    8O remember were on an investing site here for the benefit of each other, no need to use foul language or name calling, you voiced your opinion and bahroor voiced his, dont try and pursuade anyone, just trade based on your views.
  17. grassferret

    grassferret Member

    Why is everyone so upset on this board? It's really not that big of deal. This site is here for sharing ideas and discussing trade suggestions. Not for debating who is bigger moron and who is stupid for believing where the market will head. The market it doing well right now. If it continues to do well, then we will make money. If it goes down, you can make money. STOP arguing. It sounds very stupid.

    With love,

    Grass Ferrets
  18. Jack24

    Jack24 banned

    I just finished my research for the night.

    You guys are right. I'm not wasting my time arguing with bahroor anymore.

    Let the record show he is the one who personally attacked me with with insults first, though.

    I have never personally attacked anyone on this site until bahroor attacked me.

    Good night.
  19. robvia

    robvia Member

    I believe everyone is a little peeved because no one can predict the future, and the speculation of the crash doesn't give an idea as to when it will happen.

    I do believe in the historic charts where a couple people went back and chrunched the data.
    Victor Neiderhoffer - The Education of a Speculator
    Harry S. Dent - The Great Bubble Boom 2006-2010

    Bad months are February, May, and September. The year 07 is bad and usually has a correction, but it happens later in the year from August thru October.

    We're in a February correction right now if you ask me. The Fed will speak on Wednesday. The questions I have are...

    What will happen after the Fed speaks on Wednesday?
    Are we at the February bottom or can things go lower?
  20. Luc1Grunt

    Luc1Grunt forum leader

    Rob, just to be a sm@rtass..... 1)..The market will tell. 2), no one knows. And rest assured this is an "educated" guess. Economists ARE ALWAYS RIGHT yesterday.

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