Posted by Ray on October 28, 2008 under Main | 
This is not a good sign. Even though consumer confidence is low, really does this actually surprise people, there is no real reason to sell stocks right now. Yes, technical analysis says to sell, but the fundamentals are OK, relatively speaking.
We are heading back to the lows set on 10/10/08 at 7,800. The late morning selloff confirms this unless we get a strong, very strong rally by the end of the day. The market has not been able to begin and maintain any type of rally, so we are not hopeful this will happen.
The transports are down, which will drag the Dow lower, and the Russell 2000 is down as well. Both of these are indicators that there is significant weakness today in the market. While we hold out hope for a late day rally it seems unlikely as of right now.
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Posted by Ray on under Main |
Nope, they have not and they will not understand the benefits of variable annuities. This market which has devastated retirement savings has had nothing that has gone up. Even gold has now declined in value, bonds are a no go, especially corporate bonds and stocks have been horrible.
However, a variable annuity with a living benefit has done something that no other investment has done, guaranteed retirement income without annuitization. All the financial writers in the world tell you to buy index funds and to stay away from those bad variable annuities. If you listened to them you would be sucking wind in the S&P 500 with 24% or more exposure to financial stocks – pre-market meltdown – and another 20% or so in technology which as also suffered badly.
Even with reality hitting them right in the face they still deny variable annuities their rightful place as a good investment alternative. They, the financial guru’s, just don’t get it. They do not understand that the Democrats will more than likely take the Whitehouse and Congress which will ultimately raise taxes, specifically the capital gains tax.
A complete Republican controlled government did not do well, spending went through the roof along with other questionable behavior, what makes them think that Democrats will do any better when they have a much stronger history of raising taxes. Actually Obama is the only political candidate that we have ever known to be, possibly, elected on the premise that he is actually going to raise taxes.
Your political affiliation does not matter, all you need to know is what we have been saying about the 15% capital gains tax is correct, it’s going higher. Regardless of who would have been elected taxes would need to be increased given the massive debt the US has, we just never had such stark honesty from a politician who is advocating higher taxes.
So, income taxes will go up for those “wealthy” Americans, we will see what the term wealthy means after the election, and capital gains taxes will go up. This means that all distributions from mutual funds will be taxed higher and it blows the argument right out of the water for the Suze’s, Liz Pullman’s and Scott Burn’s of the world.
Oh, did we mention your retirement income is also guaranteed?
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Posted by Ray on October 27, 2008 under Main |
Currently the Asian markets are mixed with no real direction. Of course, they were trading flat last night as well with a surprise decline before trading ended. The US futures are trading higher at the moment, but as stated last night, that does not mean anything until they firm up in the morning.
We did see significant strength in the US markets today, but had selling at the end of the day. We predicted, the night before, that there would be a rally in the US markets, but changed our course by early morning. We were correct in both moves, a positive rally with a negative closing, or as close to correct as possible.
What happened today is not a good sign for forming a bottom. We are getting closer, day-by-day, to the lows of 10/10/08, 7,800 on the Dow, which will be the test of the lows. The Dow is in a definite downtrend at the moment making lower highs and lower lows. This is a sign that the decline is far form over and it is technical at this stage of the game.
We believe that the selloff is now way overblown, but it is not over by any means. After all the entire banking system almost went bankrupt this was kind of a big deal. We are seeing more bank mergers which is not surprising given the weakness in the sector and the abundance of government cash injected into the largest banks.
Consolidation will continue over the next few months to strengthen the banking system and end the blanket Fed guarantees, which they could not actually pay for if they had to. Inflation is not a concern as energy prices, which was the major cause of inflation, have subsided with some estimates of the price of crude dropping to $20 a barrel, unlikely, but we can hope.
This will lead the Fed to cut interest rates as other countries have already done. a 50 basis point cut is definitely in the works, possibly 75 or 100, but 50 basis point is a certainty. This needs to be done and we thought it would have happened a couple of weeks ago, but the Fed decided to guarantee the banking system instead.
We expect to see the markets open higher in the morning based on what we see tonight, but the end of the day close is unknown, obviously. We expect to see the same volatility tomorrow as we have seen over the past few weeks. Right now fund managers, hedge funds and pension managers are still building cash positions for redemptions that are still coming.
There is still a 15 to 20% decline coming as the technical indicators are still pointing in that direction. Caution is important for those looking to buy stocks right now.
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Posted by Ray on under Main |
Well, last night certainly took a turn for the worst in the overnight markets. We saw steep selloffs in Asia and Europe. While we think there is a strong chance of a rally today we are leaning more towards weakness by the end of the day.
Futures are showing a modest decline, but they were also limit locked down on Friday, but the major selloff never materialized. We know the one day major correction is coming as it needs to happen before the markets can recover. There will be a fools rally coming, but it just may not happen today.
As the charts start to create a base it is clear that a major market movement is coming, either up or down. We tend to see it more towards the downside at this point in time. However, long-term things will be OK, but we need to endure through these bad times first. If you hold cash then keep it in cash or dollar cost average in as we have been advocating, 2 – 5% at a time, never put it in all at once unless you have a 20% plus selloff.
Talk to you midday.
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Posted by Ray on October 26, 2008 under Main |
The Asian markets were mixed with the Nikkei trading flat, but China and Hong Kong are down about 3 and 4% respectively. The US futures are volatile, which is not uncommon in overnight trading, but showing a small loss at the open for the US.
Korea did cut interest rates by .75% which is a first emergency cut since 9/11/01. This shows continued world wide efforts to try and stop the pending global recession. These efforts will have some impact, but will not stop a recession.
As stated before, Asia is an indicator of how deep the recession could be as they are our manufacturing center. With the Nikkei at 26 year lows there is major pain heading our way. While the events we have right now are unprecedented and the emergency measures may stem much of the pain it is clear that only time will tell whether these efforts will have worked or not.
The times we live in right now are historic. We staved off the complete insolvency of the world banking system, which was a very real situation on 10/10/08. The world almost went bankrupt, it was that severe. However, the governments have stopped a potential major depression, but we still face the toughest recession, borderline mini-depression, is still on the horizon.
In the meantime, we expect, obviously, choppy trading in the AM and a relief rally by the end of the day. Of course, this is speculation, but indicators point to some strength in the markets, for a change. We could see a dramatic rally in the near future, perhaps spectacular like the 900+ point rally on the 13th. We recommend selling into that strength when it happens as you will be able to buy stocks cheaper soon after that potential rally.
These are the times when variable annuity living benefits are earning their “high” cost. All the pundits who said they are too expensive and recommended index funds instead should all be fired. They are flat out wrong, unless 40% declines in portfolios are a good thing…
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