Why?
Let's look at two previous episodes: 1978- 1982 and 1986-1990 (click on the chart to enlarge).
They show that when housing has a cyclical downswing, the decline lasts about four years.
The current housing contraction began in 2006. History tells us that the housing sector will have problems until 2009-2010.
This trend will have major implications for the economy and financial markets.
More on http://www.peterdag.com/.
George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
Don't be!
Why?
Because as soon as our leaders smell bad economic times ahead, they open the spigot and pour a lot of money in the markets.
Outcome?
Lower interest rates and rising stock prices.
More on http://www.peterdag.com/.
George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
Answer. Do not forget that the markets always win. You should not make decisions based on what the Fed will do.
Interest rates are collapsing right now. The rate on 13-week T. bills sagged below 3% (from a high close to 5%)!!!
The 10-year T. bond yields are also sinking from 5.2% to 4.62% as of this writing.
My point is that the markets respond promptly to emerging trends. Bureaucrats are always and consistently behind the curve.
My advice: follow the markets!
As far as the dollar is concerned I have been quite correct. For a completee discussion please read my The Peter Dag Portfolio.
More on http://www.peterdag.com/.
George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
The market volatility index (click on graph to enlarge) will have to go above 35 for the market to hit an important bottom.
As you can see in the above chart, the 35 level is crucial. Major bottoms have taken place when the index rose above this level.
In times like this one it pays to be patient.
More on http://www.peterdag.com/.
George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
Re "catching falling knives", is it your experience that one waits for the trend to turn, ie don't try to catch bottoms?
Answer: YES! I like to wait for my indicators to tell me that the market is likely to move higher.
More on http://www.peterdag.com/.
George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
The market is headed for 12,500 and maybe 12,000 after breaking the neckline of a head and shoulders top. I would like to read opposing opinions.
My view is that you do not try to set levels in your mind that can be broken. In other words, do not try to catch a falling knife. My point is one should focus on trends, not levels.
Another thought. It is important to have a buying strategy. Investors sometime forget to have a selling or hedging strategy. It is just as important to protect your capital.
More on http://www.peterdag.com/.
George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
According to my findings discussed below in great detail more than once, the decline in the stock market is anticipating much lower bond yields and higher bond prices.
Only then will the market attempt to find a bottom.
The markets are going to ease aggressively. The Fed has little relevance at this point.
We have these problems because the Maestro tried to find the solution to the 2000 market debacle. Let's hope they do not interfere with the markets. The distortions they create are painful, as we are experiencing.
The markets always do what they have done in the past. Lower stock prices are followed by lower interest rates. It is happening.
Treasury bills are plunging. They will be followed by lower bond yields.
More on http://www.peterdag.com/.
George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
What to do?
Why are we afraid to sell?
The markets are always right. T. bills are sinking precipitously. The markets are easing in spite of the Fed.
Protect your capital. This is rule number one in a down market. You can always buy later.
And above all, follow the indicators shown below. Strategy and timing are the key ingredients for financial survival.
By the way, concerned about your money market account?You may want to look at SHY. Talk about it with your financial advisor.
More on http://www.peterdag.com/.
George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
I like to follow my proprietary indicator. It signalled a top in May.
And now? It will become bullish when it starts rising.
Meanwhile, what can you do to minimize the pain? Raise some cash , slowly! I have been recommending this strategy to my readers for some time. You can always buy back the stocks you like once the situation has normalized.
Did you notice how well have bonds performed? See blogs below for the reason for this strength.
More on http://www.peterdag.com/.
George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
Question. Did the Fed not cut rates and inject liquidity all the way down from 2000-2002? Why do you believe this to be fail proof?
Answer. Lower short-term interest rates and increased liquidity never failed to support the financial markets. The issue is what kind of problems it will create if the Fed eases too aggressively as Greenspan did after the 2000 market peak.
The 2000-2002 easing is the main cause for the commodity boom and the collapse of the dollar.
More on http://www.peterdag.com/.
George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
