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June 11, 2008

An excerpt from my June 2008 newsletter : 

September 29, 2008

Ouch!!! The market lost 777 points today! This is the largest single-day fall ever, easily beating the previous loss of 684 points (which occurred the first day of trading after the Sept. 11, 2001 terrorist attacks).

But is this the last big correction of 2008? Or is there more to come? Yes, we'll probably have a rally tomorrow when traders come back to Wall Street -- after the initial shock wears off. But will it be a "Dead Cat" rally or will the rally have teeth?

Only time will tell.
 
It's also extremely hard to predict the stock market (long-term) right now. Yes, we can get a fix on the upcoming day's stock market based on the overnight and morning DOW, S&P, and NASDAQ Futures. But the overseas markets don't really tell us much anymore. They react more to our markets than our markets react to theirs.

Long-term? Once again, that's hard to say right now. Is the worst over yet? We'll see.

January 22, 2009

QUICK UPDATE:

The stock market has been basically holding steady since October 2008. In fact the DOW has been trading between 8000 and 9000 (more or less) since October 27th.

In fact, the DOW has closed under 8,000 only three times since I first re-entered the stock market on October 27th (when the DOW closed at 8,175.77).
 
(1) November 19, 2008:  7,997.28

(2) November 20, 2008: 7,552.29

(3) January 20, 2009:     7,949.09

I've been in and out of the market since then, trying to buy low and sell high. The danger, however, is that I -- along with many other traders -- are beginning to "depend" on this 1,000 point trading range (i.e., a DOW that ranges from 8,000 to 9,000 -- selling your stocks at the 9,000 level and buying them at 8,000).

That being said, the horrendous  turmoil of 2008 seems to be over for now, although the stock market was certainly "panicking" on January 20th (Inauguration Day) when more financial worries flooded the stock market. Some on Wall Street thought we might head lower. We were breaking various financial trend lines.
 
On CNBC, I even heard that England might go bankrupt!

Nevertheless, even though we have more problems ahead, the worst is probably over for now.
 
However -- I fully expect to be out of the stock market later this year since I believe the market will be lower by the end of 2009 or the beginning of next year.
 
I don't like going out on a limb with this prediction, but I have to call it as I see it. There's been way too much financial corruption and corporate malfeasance in 2008. There has to be more financial aftershocks.
 
If nothing else, logic dictates it.

Bernie Madoff was just another piece of the iceberg tip. The banking, financial, mortgage crisis mess of 2008 was the invisible ice below the waterline, and what we have to deal with now are the various floating financial icebergs that are still out there -- that were released during the Titanic-like financial shipwreck of 2008 -- and are now simply waiting to be uncovered and cause their own form of financial havoc.
 
Is my above paragraph a bit overdone? Perhaps, but the end of 2009 will probably see a DOW below 8,000 again.

So -- make your money in the stock market while you can, and then get the heck out! It's a trader's market, however, so don't expect to make any real money by buying and holding.

Buy and hold is dead.
 
At least for 2009.

By the way, congratulations President Obama. Don't let us down! "Hope" is all that remains for many Americans. If we lose that, this country will really be in trouble.

Happy New Year to all.
 
And be well.

Peter Gottschall

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March 9, 2009  (Update)


I've received many emails asking what I think is coming up for the stock market. Good question. The DOW, S&P 500, and NASDAQ indexes have all broken their trendlines to the downside and there doesn't seem to be a clear bottom in sight.

The DOW actually closed at 6,547.05 today.

The S&P 500 closed at 676.53.
 
NASDAQ closed at 1,268.64.
 
That's amazing. In fact, both the DOW and S&P 500 have fallen more than 25% this year alone (not including last year's horrendous losses).
 
And if you include last year's horrendous losses, the DOW has lost nearly 54% of its value since it's high of 14,164.53 on October 9th, 2007. The DOW is also at its lowest level since April 15, 1997!

And if you include last year's losses, the S&P 500 has lost approximately 57% of its value since its high of 1,565.15 on October 9th, 2007. The S&P 500 is also at its lowest level since September 12, 1996!!!

NASDAQ has not performed as poorly, but it is still at its lowest point since October 9, 2002.

That being said, the stock market will likely rally into the summer this year -- at which point you should consider getting back out of the market since we are probably heading for another "crash / correction" by the end of this year or the beginning of next year.
 
Hard to believe? We'll have to wait and see. A lot of people didn't believe me when I said the stock market would crash between August 2008 and April 2009.  It's certainly been doing that. Wouldn't you say? Well, March is almost half over, so sometime between now and April, we should see this rally begin. Get ready for it. The only problem is determining when it will start. We will need some type of positive catalyst. Perhaps President Obama's Treasury Secretary, Timothy Geitner, will finally come up with a plan or a major announcement that describes how to "fix" the financial / mortgage crisis. Perhaps it will be some other catalyst. Regardless, the market will start to rally and we may even see a 9,000 DOW again. Perhaps more. But at some point -- don't get greedy -- get the hell out and wait until next year to buy stocks again. 

In short, if you have stock market losses, recoup some of your losses when the rally begins since it will likely be a big rally. There's a lot of cash sitting on the sidelines. A lot of cash. But even seasoned investors are afraid to get back in. But once the money starts flowing back into the market, more and more cash will drive the market higher and higher as fears diminish. This should be a very nice bear market rally, but the market will likely retreat again by the end of this year or the beginning of next year. Only time will tell.

But remember, buy and hold is dead for 2009!

Good trading to all.


Peter Gottschall
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April 7, 2009 Tuesday (UPDATE)

September 10, 2009


I just wanted to add a few more comments.

A ($amount removed) gain may not seem like a lot of money to some, but it's a very nice piece of change for me. I realize some fund managers have made millions, but I'm simply managing my own money. Not a mutual fund. That being said, I still feel the stock market is far too unpredictable right now. "Bulls" and "Bears" are basically split right down the middle in their expectations and predictions of the stock market.

For example, 50% of traders think that stocks are overpriced and that we are due for a correction (Bears). The remaining 50% of traders think the stock market is poised to go higher (Bulls). But there is no clear-cut consensus on this subject.

There are a few things going on, however, that are clear. Many mutual fund managers missed the massive rally that began in March. And fund managers need to show growth in the funds they manage. It's their job! For example, if the market is up 50% and a mutual fund manager has been in cash during the recent rally, that fund manager may only be up 5-10%. In short, how does a mutual fund manager explain to clients (and to his or her boss) why their fund has underperformed the market?!

Funds are basically compared to the S&P 500, NASDAQ, or the Wilshire 5000 or to whatever index is comparable. And fund managers need to beat (or at least meet) that index. After all, mutual fund managers charge fees (operating expense, etc.) for managing a fund. And if a managed fund has underperformed an index, that fund manager will get worried about "job security." And rightfully so. Fund managers can be replaced if they are not performing.

So -- fund managers are currently keeping this stock market alive. As long as fund managers keep putting cash to work (when the market has a slight sell-off) then the market is being kept "artificially" afloat as fund managers try to catch up before the end of this year. Fund managers need to show comparable gains by December 31st, 2009. Because on January 1st, 2010, they start all over again at zero.

But be careful. Fund managers can pull monies out of stocks -- at any time -- before the end this year (or early next year). In short, once a fund manager has obtained his or her target goals for their fund (as compared to the index it is being compared to), that fund manager can "rest" (more or less) regarding this year's fund performance.

In fact, many fund managers (mutual funds and hedge funds, etc.) who participated in the recent March to August rally were able to take profits last month and just relax. They made a lot of money for their clients this year.

That's basically what I've been doing. I've made enough money in the stock market for this year. And I don't feel like risking it unless there's a substantial stock buying opportunity prompted by a significant stock market sell-off. Subsequently, I'm not buying any stocks until I see that opportunity.

So -- beware of the current "artificially" inflated stock market. I believe we are in a "W" shaped recovery. Maybe even a "Double W" shaped recovery. We have another downturn (maybe even two) before next summer 2010. And by next summer, we'll be seeing more home foreclosures. And a massive exodus of people from the stock market as people more or less break-even from their losses and get out of stocks altogether. And other related financial problems too.

It's coming. Get ready for it. We're heading for another stock market "crash" by next July / August 2010.

In the meantime, if you're going to "swim" in this stock market now, just be aware that you are swimming in stock market waters that are filled with riptides and sharks. If you're careful, you can survive. But you have to watch the stock market waters every day. All day long. Throughout the day. As much as possible. It's a full-time job.


ADDENDUM

September 11, 2009

By the way -- and just for the record -- do you realize that the stock market is at the same exact level as it was eight years ago?

On September 10, 2001, the DOW closed at 9,605.51 (the market shut-down 9-11-01).

On September 11, 2009, the DOW closed at 9,605.41.

That's a difference of only ten cents. In short, the stock market is at the same low levels as of 9-11-2001!

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May 4th, 2010

UPDATE:

I haven't posted anything since September 2009, but I wanted to add the following statement: I still believe that a stock market crash is coming. It will occur sometime between now and October / November of this year. But it will likely occur this Summer. Probably July.

In fact, the same problems that occurred with our financial institutions in 2008-09 -- which prompted an economic collapse that almost led us into a depression (one that could have matched the severity of the 1929 Depression) -- will now manifest in the form of sovereign debt for countries around the world. Particularly countries in the Eurozone (i.e., Greece, Spain, Portugal, Ireland, etc.). Europe is in trouble. And this will carry over to the rest of the world.

I'm not alone in this opinion. Many notable economists (such as Nouriel Roubini) also believe this to be true. Even financial astrologers -- who predicted the 2008 stock market crash as early as January 2008 --  have been predicting a severe stock market crash this year. I know how that sounds, but they are often correct, although sometimes they are also dead wrong!

In any case, today's sell off (along with stock market volatility over this past week) is only a precursor of things to come. I believe that we will probably rally back in the next few weeks, but I plan on being 100% out of the stock market very soon. Sooner rather than later. Certainly before July. Probably by June. And maybe even this month.

Personally, I've been in and out of the stock market since the beginning of this year, but I rarely stay in the market overnight. I prefer to day-trade in and out of stocks (on margin) several times a day, and only on days when the market is decidedly positive and morning futures are up. I generally watch the S&P, DOW, and NASDAQ futures from 6 AM to 9:00 AM and then determine whether I want to jump in at the market open, or whether I want to wait for equity dips and buy stocks or ETFs at that time.

In any case, I've made money this year, but it's much harder to do.

Subsequently, I continue to recommend being 100% / fully out of stocks before this Summer. I initially made this statement last July 2009 and again in September 2009. And I continue to hold that opinion now. The stock market is a dangerous place to be this year.

Good luck. Be safe. And be careful.


Pete Gottschall
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May 19th, 2010 ADDENDUM

Just wanted to add one more thing. For those who want to take advantage of the current and upcoming stock market declines, you may wish to consider investing in Inverse ETFs such as ProShares UltraPro Short S&P 500 (SPXU) or ProShares UltraShort S&P 500 (SDS). You can check these out on Yahoo Finance or Google Finance.

For example, SPXU is a triple inverse ETF that seeks daily investment results (before fees and expenses) that correspond to triple the inverse of the daily performance of the S&P 500 Index. The fund invests in equity securities and/or financial instruments (including derivatives) that in combination should have triple the inverse daily return characteristics of the S&P 500 Index.

For example, if the S&P 500 declines by 10%, this triple inverse ETF (SPXU) will go up approximately 30%. But be careful. If the S&P 500 increases by 10%, this ETF will subsequently lose approximately 30% instead. So don't invest in this fund without careful monitoring. You need to watch these funds every day. Throughout the day. And trade accordingly.

Nevertheless, these inverse ETFs will probably be one of the best ways to make money during the upcoming 2010 crash. That being said, gold will probably NOT be a safe hedge during the upcoming crash (don't chase gold just because everyone else seems to be chasing it; gold is becoming something akin to a financial bubble all on its own). And as always, you can certainly play it safe and simply be in cash. Nothing wrong with that.

Once again, be careful out there. This is a dangerous stock market.
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May 26, 2010 ADDENDUM

I've recently been asked if I recommend buying and holding shares of Inverse ETFs on a long-term basis (from now until the Summer).

My answer is an emphatic no!

Personally -- as mentioned earlier -- I don't recommend being in stocks / ETFs overnight. Not right now. Too much volatility. Markets are too inclined to sell off on any bad news. We are also just as likely to get a radical uptick bounce on any positive news. For these reasons and others, I recommend leveraged ETFs as well as Inverse ETFs. And I recommend selling whatever shares you have by the 4 PM stock market close (bad news sometimes comes out of nowhere overnight, and DOW Futures have recently been down by a few hundred points before the market even opens).

In any case, when the overall energy and sentiment of the stock market is negative (and/or when stock futures are down; or the European markets are in the red, etc.), then consider the Inverse ETFs mentioned above. This way you can maximize any stock market gains when the market is down. In fact, the worse the stock market is, the more money you can make.

But on days when the overall energy and sentiment of the stock market is positive, consider leveraged ETFs that will produce double and triple the daily return characteristics / daily performance of the Index they are compared to.

For example, ProShares UltraPro S&P 500 (stock symbol UPRO) is a triple leveraged ETF that will produce approximately three times the return of the S&P 500. If the S&P 500 were to go up 10%, then UPRO will go up approximately 30%.

Another ETF to consider is the double leveraged ProShares Ultra S&P 500 (SSO) with approximately double the return of the S&P 500.

ProShares Ultra QQQ (QLD) will produce approximately double the return of the NASDAQ Index.

ProShares Ultra Dow 30 (DDM) will produce approximately double the return of the DOW Index.

Just remember that all these ETFs can also lose you double and triple the amount that you would have lost had you been in a simple DOW, S&P 500, or NASDAQ Index fund.

So be careful.  And I hope this clarifies things. Good trading to all.
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June 29, 2010

Wow! I've been waiting for a market like today. It is now 10 AM, and the market is down. The Futures were also down last night, so I was subsequently having trouble sleeping. Not in a bad way. More like a kid waiting for Christmas morning. But I finally fell asleep sometime after midnight.

Why am I excited? I bought 14,809 shares of triple inverse SPXU on Friday June 25th. And I sold it this morning. I'd been waiting for a short-term market correction. Today's the day! The DOW is below 10,000 again, and SPXU is way up (since it performs the opposite of what the S&P 500 does). The market may get worse, but I don't want to get greedy. I took my ($amount removed)  gain and exited the market (with capital gains spread out over 3 accounts). Yes, I may have 8 brokerage accounts, but I only invested 3 accounts in SPXU. Although I was relatively sure the stock market would drop, I didn't want to risk everything I had in SPXU!  I am not a gambler. In fact, when I go to Las Vegas or Atlantic City (which is rare), I don't gamble. I don't trust in the luck of the dice or the spin of the roulette wheel. There has to be a logical reason to take risk. There needs to be an intelligent decision making process. Yes, luck helps, but don't count on luck alone.

Anyway, this is a very nice piece of change for two days work. Well..., more like two days of waiting!

This is just the beginning folks. There's a lot of money to be made in triple and double inverse ETFs. But you need to bet against the stock market. If you're not comfortable doing that, take your money out of stocks and put it into cash / money market accounts. I don't think even bond funds will be safe during the upcoming correction / crash. I'm not even sure gold will do well. We'll have to wait and see with that. But you should do well with triple inverse ETFs.

But be careful!!!

Inverse ETFs are not designed for long-term investment. Use them for a day or two at a time. Get in and get out. Don't linger or you can lose your shirt. And whatever you do, watch the stock market while you're in. And as mentioned, don't get greedy.

Peter Gottschall
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July 12, 2010

Be cautious right now! Don't go short just yet. Don't buy SPXU just yet. We may still have short-term immediate rises in stocks. The Bulls can still make some money (until more negative news starts to surface). In other words, we may still have a few more bear market rallies coming in the immediate future.

Personally, I'm waiting for more negative news before I get back in.  Don't get me wrong. I'm not necessarily wishing for bad news. It's just that I'm relatively sure that bad news IS coming. Among other stock market signs, there's been a massive build-up of negative energy for many months now. Too much negative energy. In short, we are now in the "calm" before the storm. Don't let the quietness fool you.

The economic crash is still coming. Probably at the end of July / the beginning of August with repercussions lasting until November of this year and probably into 2011. Depending on how bad it gets.

It's coming. Get ready for it.

Peter Gottschall
 
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August 18th, 2010

We are -- and have been -- in a trading range for a while now. The market tends to sell when the DOW hits 10,700 or so and rebounds when it drops to 10,300 or so.

The S&P 500 has an approximate trading range of 1,020 to 1,200.

So I've been buying and selling UPRO and SPXU within these trading ranges (more or less).

I still believe a "crash" is coming sometime before November of this year, but I'm not sure when. My hunch now is late September? But the market is too  "unpredictable" right now.

In fact, I genuinely believe that the European stress tests on Friday July 23rd caused the U.S markets to react in an overly "exuberant" manner -- even though economists such as Nouriel Roubini believe that the stress tests for the Euro banks were not strong enough and that sovereign debt was not really evaluated / properly tested.

So -- I am modifying my opinion. I'm no longer sure that the market will crash this month (August).

But we do have relatively low volume. Unfortunately, most individual investors are not participating in this stock market. People have soured on stocks. Who can blame them. Many individual investors are now in bond funds. And institutional investors seem to be the only "players" in the stock market right now. So without "new money" coming into the market (from people parked in cash or bonds), we seem somewhat limited to the above aforementioned trading range. The danger is that bad news (of any kind) often becomes a serious catalyst to take the market lower. In short, we all seem to be waiting for the "other shoe to drop" -- and it seems sensible to assume that the other shoe will eventually hit the floor.

Also -- projections for the third and fourth quarters of this year predict relatively low growth.

Subsequently, I continue to believe that stocks are a "dangerous" place to be right now. At least long term. Get in and get out. Don't buy and hold. Ride the roller coaster up, but get out before the ride down. You can probably do this for awhile, but for how long? Hard to say for sure.

Most signs, however, still point to the stock market turning south and selling off between now and November of this year.

Good luck. And safe trading.

Peter Gottschall

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September 15, 2010

I sent out an email late last month when the DOW was below 10,000. I said that I was relatively certain that the we'd get back to a 10,600 DOW -- and that at that point I'd likely be shorting the market.

Well, we're almost there. I wasn't sure we'd get here, but here we are.

Subsequently, I expect next week to have a sell-off. Probably from September 23rd to September 30th. Perhaps even into October.

So -- I'll be carefully watching the market  every day, and when we get to a 10,600 to 10,700 DOW (somewhere therein), I'll be buying SPXU and riding the market downward. As previously mentioned, SPXU goes up (approximately 300%) when the stock market goes down.

As of late, the stock market has a herd mentality, and I don't think that's going to change anytime soon.  So I'm planning on shorting the market on September 20, 21, 22, or 23. I might even begin shorting on Friday September 17th.

We'll see what happens. Got to play it by ear. Need to watch the market each day for a good time to jump in with SPXU or SDOW or SQQQ (although I like SPXU best because Financial stocks sell off rather quickly, and the S&P 500 has a high concentration of Financial stocks).

Subsequently, expect a possible 10-15% correction starting next week and probably lasting into October.

Pete G.
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October 12, 2010

The FED has thrown so much money at this economy that it has artificially kept the stock market going higher. Is this a good thing? Perhaps short term, but now that the FED has indicated that they'll be conducting Quantitative Easing (Q.E.) by buying up $2 trillion of treasuries, perhaps more (i.e., using proceeds from its mortgage bond investments to buy U.S. Government Debt), this will probably keep the market going up a while longer.

Unfortunately, this will devalue the dollar. This may also "force" people into stocks because they can't make money anywhere else; however, this could also make stock investors sitting ducks for a "crash" later on.

In short, there will be no place to put your money -- to make  money --  except stocks. Namely dividend paying stocks.

Subsequently, I'm no longer sure that the stock market will "crash" before November. If the FED had simply let the market do what it does, we would have had a major correction in September. This would have been a healthy thing. Corrections are part of the natural cycle of the stock market. Instead, we now have an artificially inflated market.

And I trust it less than usual.

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November 12, 2010

I've been shorting the market with SPXU since Monday November 8th. Not sure how long this correction will last. I'm hoping that the DOW will drop to 10,600 or less (and the  S&P 500 to 1130 or less).
 
We're also starting to hear rumors again about Sovereign debt / default in Ireland and Portugal. These are the same concerns that prompted the market to sell off earlier this year.
 
We are also hearing that the FED is modifying their plans for QE 2 (Quantitative Easing) until November 30th.  Personally, I'd like to see the complete elimination of the FED (but that's not going to happen anytime soon). Regardless, I don't think that QE2 is a good idea anyway. I don't like having the dollar devalued. This will also cause currency wars with other countries as they will attempt to do the same.

Let's see what happens next week. Poor earnings from CISCO helped trigger the sell-off this week. Earnings reports next week may also help continue this sell-off.

I'm betting on a sell-off.

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ADDENDUM   (November 16, 2010)

...however, my only concern is that  traders will probably attempt a rally as the DOW dips below 11,000 several times. It will then either sell off or rally. Chances are that traders will attempt a relief rally, but will it last?

December could also be a tough month as traders and institutional investors "lock in" their profits for the year and go to the sidelines. Look for another big sell-off in mid to late December. Perhaps earlier.

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December 17, 2010

Now that Congress has agreed to extending the Bush tax cuts, the December sell-off of equities will probably be put on hold. In other words, there's no significant reason to sell stocks right now. In short, there's no penalty for holding equities into the new tax year.

So what's going to happen? I don't know for sure. I got out of shorting equities a few weeks back, and all month long, I've been looking for another key moment to short the market again, but each day the bulls keep buying on any and all dips. So the stock market keeps slowly grinding upwards.

Again, there's so much positive sentiment in the stock market that a sell-off in December now seems unlikely. And because December is traditionally a good month anyway -- the "Santa Claus" rally and all that -- my current plan is to probably short the market again on December 31st. I still believe we may have a bit of a sell-off / correction in early January. But we'll have to watch the market every day to see what happens. Sentiment often changes. But it's extremely positive right now.
 
Even the CBOE volatility index (people buying protection due to stock market fears) dropped 10% today. That's historic. So, is this complacency? Are the problems in Europe and in this country all over? Is unemployment suddenly better? Have real estate foreclosures ended? Are real estate home values improving? No they're not.
 
And yes, I believe people are becoming too complacent. Traders suddenly seem not to be worried. And that worries me! But things do seem to be getting better. Time will tell.
 
But as I always say, you need to watch the stock market every day. Throughout the day. The stock market changes. Sometimes gradually. Sometimes suddenly. However, now that negative tax repercussions for selling stocks in 2011 are over (with the two year extension of the Bush tax cuts), the normal 10% sell off / correction will probably occur after 2010 passes into the new year.
 
But it's always possible that we may begin to gradually sell-off before the end of 2010. 

As always, time will tell.

But even I'm starting to become a bit bullish on this stock market. Did we dodge a bullet? Have we averted a double dip? Perhaps. However, I'd like to see a 10% sell off before getting back into stocks again (going long).  Will we get one? I hope so. We'll have to wait and see.

Ideally, I want to short the market for a 10% correction and then go long as the market continues its upward advance in 2011 as the economy "seems to improve."

Good Trading. And Happy Holidays!

Pete Gottschall ("PG 1")

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January 1, 2011 (1-1-11)

Every time I think I'm finished writing this "blog," I am drawn back to it to add another entry. So here goes:

Well -- I didn't short the market yesterday. I really wanted to. But there's still too much positive sentiment in the stock market. The prudent thing would be to wait until Monday to see what the stock market does. So, that's what I'm going to do.

And traditionally, the "Santa Claus" rally (when it exists) usually extends to the first few days of January anyway (and sometimes the first few weeks).

So -- I'm going to wait until Monday.

Subsequently, I believe that I'll be shorting the market someday this week. Sometime before January 7th.

But as always, I've got to play it by ear and watch the market everyday.

Here's hoping for a natural 10% stock market correction in January 2011.

So -- at the risk of sounding like a broken record (remember those things?) -- you simply have to watch the market every day. Throughout the day. And invest accordingly. It's sort of gambling after all. Even though there are many intelligent, evaluative, and analytical things you can do to judge where the market might be going.

Good Trading and Happy New Year !!!

"PG 1"

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January 13, 2011

I've been in and out of SPXU and BGZ  (both 300% short) and UPRO (300% long) for the last two weeks. But I'm only really in for the day. I don't usually stay in overnight. I try to grab $2,000 "here" and $2,000 "there" (that's the minimum amount I like to walk away with; anything more than that is an extra bonus).

But it's hard to do right now. It's difficult to know which way to invest (or shall I say "bet"). It's almost just as easy to lose money right now. And when I think the market is finally going to correct, the bulls come in and buy on the dips and the market rallies again. But I think we're probably ready for a sell off. But how much of a stock market sell off? Will it be 10%? -- or 5%? -- or 2%? -- or will it only be only 1%?!
 
Regardless, I really wish the FED could be eliminated -- to have them stop interfering with the markets. The FED is basically offering free money to select financial institutions (at more or less zero basis points). And companies such as Goldman Sachs, for example, can take this money and buy stocks on the dips. This helps keep the market rallying. It also helps create the "illusion" that things are getting better. It also makes such  companies as Goldman Sachs very wealthy -- all on the financial backs of the American taxpayer. Subsequently, socialism is alive and well in the United States, but only for Wall Street and for select American financial institutions.

In addition, the hope is that people will feel more comfortable about spending money again. And that people will start to invest in the stock market again. The goal of the FED is that the financial "illusion" will eventually become the reality. So yes, the stock market is being held afloat by the FED. Interest rates have not gone up for 20 months. Free money for 20 months!
 
But the FED is playing a dangerous game. If their "game" works, they'll look like heroes. If their strategy doesn't work, they'll have splattered egg all over their face. Shell and all.

"PG 1"

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February 20, 2011

Just wanted to add one more comment. This will likely be my last post for awhile. So here goes.

I've stopped shorting the market. There's simply too much exuberance and extremely positive anticipation in the stock market right now. Yes, the FED has created an artificially positive environment. QE2 among other things (and even QE3 if necessary) has basically "forced" investors to buy stocks because you can't make any real "safe" money anywhere else. Equities are the "safest" play right now. But if the market turns south again with a definitive trend, I'll start shorting the market without any problem. You know what I always say, you have  to watch the market everyday. Throughout the day. We'll just have to wait and see.

Nevertheless. I've been dabbling in UPRO, BGU, TQQQ, and UDOW. These are all 300% (3x) leveraged ETFs. I like these ETFs. Broad based and diversified, and they move with the indexes that they're compared to.
 
And they correlate well. I've charted these ETFs on a daily basis alongside the DOW (.DJI), NASDAQ (.IXIC), NASDAQ 100 (NDX), S&P 500 (SPX), Russell 2000 (RUT), and the Russell 1000 (RUI). Bottom line, these ETFs (UPRO, BGU, TQQQ, and UDOW) correlate well. They mirror the above indexes. And they are consistent. I like that.
 
Subsequently, I've recently made money with these leveraged ETFs, but I'm cautious. Remember, when an index goes up 1%, the corresponding leveraged ETF goes up approximately 3%; however, when an index goes down 1%, the corresponding ETF goes down approximately 3%. In short, the ETF is basically multiplied by 3.
  
Any bad news also usually prompts a sell-off, but as mentioned in earlier posts, the bulls come in and buy on the dips.

Subsequently, it's very hard to make any reliable money shorting the market right now. But last year -- when I regularly and frequently shorted the stock market -- it was much easier. I didn't have to worry about bad news. I actually made money on bad news. But nowadays, even bad news has a very short-lived negative effect. It usually lasts a day at the most.

Yes, we are certainly due for a small natural correction -- 5-10% -- but we may not get a major correction until late Spring or Summer; however, I think we could get a short term minor correction by March. For example, the volume of the stock market has been very low. Almost anemic. This concerns me. Yes, we are certainly due for a correction, but I probably won't short the market in anticipation of it. Yes, I would have shorted the market if this had occurred last year, but probably not now. I'd rather buy after a sell-off. In short, I'd love to see a 5-8% correction and then jump back in as the stock market probably surges higher again.

In addition, there isn't a lot of new retail money coming into the market. Yes, there are money inflows coming back into equities, but not enough. A lot of people are still sitting on the sidelines. Most have missed the rally that started in September, but retail investors may get back into stocks and mutual funds again if we get a 5-8% correction. In fact, they probably should get back in to stocks -- many have been sitting in cash or bond funds instead -- but individual retail customers with 401Ks and IRAs have been burned by stocks. And most have been burned more than once. These people clearly reflect the age old expression: "once burned, twice shy." But with a short term 5-10% correction, they should probably consider buying mutual funds and stocks again.
  
As mentioned, the FED has helped make the current stock market one of the "safest" places to make money right now (barring some unforeseeable catastrophe or terrorist attack, etc.). Nevertheless, anticipate some kind of correction by March. How much of a correction? I don't know. I'd love to see a 10% or more correction -- and then start buying stocks again. But we may only get a 5-8% correction. We'll have to wait and see.
  
So, I have a new mantra:

(1) Don't fight the FED
(2) You can't fight the FED
(3) Why fight the FED?

...but yes, the FED sucks; they're basically manipulating the market.

Good luck folks. And good trading. As mentioned, this will probably be my last post for awhile. I realize that many of you will now stop coming to my website, but maybe I'll see you again in the Summer. In any case, it's been nice "talking" with you. Take care. And be well.

Peter Gottschall  (PG1)

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July 24, 2011

Hello again folks. I've had a lot of people emailing me about what they should do about their stocks. So I'm back again. May, June, and July have been basically horrible. Corrections always hurt if you are on the wrong side of the trade. The markets are also unreliable. Can't trust them. Lately, it's also been impossible to determine where the market is going. Radical moves up and down. Not a traders market at all. You can't time this type of market.

 We also have the United States debt ceiling looming in early August -- and Congress can't come up with a compromise that both Republicans and Democrats can live with. So I'm betting that the stock market will sell off again this upcoming week.

What to do? Personally, I sold all stocks on July 21st.  I'm not going to "gamble" either way. As much as I'd love to short this market, I'm not going to take that chance. I'm going to sit on the sidelines and "keep my (proverbial) powder dry."

In short, the stock market could have a big bounce if an agreement is reached in Congress, or stocks could pull back further if the United States loses its AAA rating. Chances are that an agreement will eventually be reached, but with new Tea Party congressmen and women (some like to call them "Tea Baggers") holding firm to their ideology, we may actually reach a point where we can't reach a viable compromise.

Yes, I'd love to short the market for this reason, but I'm going to play it safe. I've moved 100% into cash and will stay there until something changes. It's too risky right now. I believe that it'll be a better idea to wait until the first or second week in August to get back into stocks. By then, I believe that the S&P 500 (.SPX) will drop below 1300 again. This should be a buying opportunity, but how far below 1300 do we go?  That's the question. In short, I will seriously look at buying stocks again as the S&P 500 declines to 1285 to 1300.


Pete Gottschall ("PG 1")
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July 26, 2011

UPDATE:

Hello again. I don't always follow my own advice. Shorting the market is just too tempting! The market trend seems clearly to be down. So, I'm shorting the market this week; however, I don't recommend this for everyone!!! I still recommend that most people play it safe and move into cash. That includes IRAs, 401Ks, KEOGHs, annuities, and brokerage accounts.

In fact, I've moved all of my retirement accounts into cash or money market. However, it has come to my attention that some people are confused by this. I've been asked "Won't I incur a tax penalty by doing this?" The answer is no. You're not withdrawing monies from an IRS approved retirement plan. You're simply reallocating from stocks to cash. But to avoid an error or any misunderstanding, call your IRA, 401k, KEOGH, and/or annuity company to make sure that you won't have any short-term redemption fees within the retirement plan. For example, some companies require that you keep your monies in a mutual fund for at least 30, 60, or 90 days; subsequently, if you move out of a mutual fund, the company (not the IRS) may charge you a short-term redemption fee (i.e., usually 1% or so). But if you've been in a mutual fund that contains stocks for longer than this, there should be no reason to worry.

But ask your IRA, 401k, and annuity company to confirm. If you're not sure about something, always ask. It also helps that most financial services companies will talk to you on a recorded line. So even if you get the wrong information (which is possible, but unlikely), your conversation has been recorded and the company can go back and review the conversation. I had to do this several times over the years; the company actually had to correct their mistake.

But bottom line, there is no IRS penalty because the money is not leaving your retirement plan. It's not being withdrawn. It's simply being reallocated to cash on a temporary basis. At least for the short-term.

Peter Gottschall  (PG1)
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July 31st, 2011 (UPDATE)


Please keep in mind that the stock market may be up this week if the House and Senate agree on a plan. Looks like they may do so. But we may only get a temporary pop in the markets. A lot of people lost money in the stock market last week. So you may see some quick profit taking if the market rallies. Also remember that sovereign debt in Europe is still a problem for U.S. markets. So be careful. Wait for things to settle down. The S&P 500 may actually fall below 1285. It may even trade between 1250 and 1285 (but as previously mentioned, it will probably trade between 1285 to 1300 before it breaks out to the upside). Once the market settles down, however, I believe it'll probably be a better time to buy stocks again (to go long on equities). So be careful folks. And good trading.

Peter Gottschall  (PG1)

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August 3rd, 2011


The S&P 500 (.SPX) dropped this morning to 1234.56 at approximately 10:37 AM, but it bounced back and closed at 1260.35. This is good news. In fact, the S&P 500 has consistently closed above 1250 throughout the past week.

Again, this is a good sign, even though we're having wild swings during the day. The S&P 500 even had its biggest one day loss yesterday in almost one year (it could have been a lot worse if Congress had not passed / increased the Debt Ceiling). This has also been the DOW's longest losing streak since October 2008 with the DOW losing 858 points in the last 8 days alone.

But I believe the market may be starting to settle down. This means that I'm thinking of starting to go long. I'm thinking of buying stocks and ETFs again. Slowly at first. I'd like to see the Jobs Report on Friday to see how bad unemployment might be. If it's below expectations, the market will almost certainly react negatively to this. If the Jobs Report is poor (which it probably will be), but within expectations, then I will probably start buying some stocks and ETFs for my brokerage account and retirement plans.

I also sold all my shorts yesterday (with the DOW down 265.87 points, the SP&P 500 down 32.89 points, and the NASDAQ down a whopping 75.37 points!). As mentioned, the market continued to decline this morning , but I was still happy to get out with my gain yesterday -- with the stock market (DOW) correcting a full 6.7% in the last 8 days alone.

This leads me to a short discussion on MARGIN. Many of you are asking me about this. Yes, I have margin, but I rarely ever use margin to buy stocks. I don't borrow money to buy stocks. The only reason I use margin is to avoid "Good Faith Violations." Let me try to explain this. Here's the simple version. The SEC requires that the sale of all stocks (and ETFs) settle in three days. Technically the monies from stock sales are not really available for three business days. So the SEC prohibits the excessive sale and purchase of stocks while the monies are in this three day "limbo." Subsequently, if you get three "good faith violations," you get restricted from trading stocks.

The only way around this is to buy stocks with margin. But the only difference for me is that I never  buy stocks with margin that ever exceeds what I actually have in cash. I know. It sounds a little bit complicated the first time you hear this, but with margin, I can go into and out of stocks all day long (if I choose) without any restrictions -- as long as I never exceed what I have in cash.

In short, I never ever borrow money that I don't have to buy stocks. I've done the same thing with my credit cards. I have never ever carried a balance on my credit cards; I always pay my credit card balance each month (my FICO score is also well above 800). This policy has basically kept me out of financial trouble because in my early 20s, I barely had two nickels to rub together. That memory has always stuck with me. Times were tough for me in my early 20s. So I learned the value of a dollar early on. And this memory has stayed with me my entire life.  So to this day, I tend to be very careful with money. Some might say I'm frugal. I say I'm careful. But this is one of the reasons why I never borrow money. I hate giving my hard earned money as interest to a "stinking" bank.  I even own my car and home free and clear. I won't borrow money. Period. And I never borrow money (using margin) to buy stocks.

Anyway, I hope that explains what margin is. Again, it's the simple explanation. You can always Google "margin" to find out more about it or contact your brokerage company. Personally, I like Fidelity Investments. I really believe they are the best company out there. They're "open" 24/7 and their fees and operating expenses are minimal or even nonexistent in some cases.

Peter Gottschall (PG1)

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August 4th, 2011


Holy crap!

The DOW was down 512.76 (4.31%) points today. It closed at 11,383.68!

The S&P 500 was down 60.27 points (4.78%) today. It closed at 1,200.07!

NASDAQ was down 136.68 (5.08%) today. It closed at 2,207.20!

I wish I was still shorting the market. Well, at least I was "parked" in cash. Cash seems to be the best "safe haven" for the moment. The stock market (S&P 500) lost approximately $1.3 trillion in valuation over the last 9 days.

My recommendation? Stay in cash. There's serious talk again about a double dip. The U.S.A. and the rest of the world seem to be in a world-wide recession. Sovereign debt issues in Europe are getting worse, and the market thinks Europeans are in denial. Thanks to the Tea Party and the Republican Party, there's also little or no additional stimulus money coming from the government. Unemployment is also still high, and the FED is basically out of bullets. Furthermore, QE1 and QE2 are over, and I'm not sure QE3 (if it occurs) will do much at all.

This major sell-off has basically caught most people off guard. Even I thought the sell off was over yesterday. I wasn't expecting today's carnage.

So -- if you're in cash, you may want to stay there. At least for a few days. What many traders are expecting is a short bounce up -- maybe 200 points in the DOW -- and then another drop down that will signal a bottom. This is usually what happens, but nothing is ever carved in stone. And tomorrow we get the "Jobs Report." Let's see what happens.

 
Peter Gottschall (PG1)
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August 5th, 2011

The Jobs Report came in better than expected this morning, and the DOW rallied +168 points, but it then sold off and swung the other direction. By 12 Noon, the DOW was down by approximately -244 points. That's a swing of approximately 416 points!  The DOW then rallied again and was up by approximately +171 points by 2PM. Is this the recapitulation described above (in my August 4th entry) that will signal a bottom "...maybe 200 points in the DOW...and then another drop down that will signal a bottom..."? Possibly.

The immediate negative catalyst that could hinder this good news, however, is that the rating agency for Standard & Poor may downgrade U.S. creditworthiness this weekend. The S&P rating agency has had a negative outlook on the U.S. since April 18th of this year. They have indicated that they may downgrade the county's credit rating from it current AAA status.  In fact, on July 14, Standard & Poor put the U.S. government on a credit watch with negative implications. This means there's a 50% chance that the U.S.’s long-term debt would be downgraded within 90 days!

This could be a negative catalyst for the stock market on Monday. Let's see what happens next week.

Peter Gottschall (PG1)

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Monday August 8, 2011

Ouch!

The DOW was down 634.76 points today (down 5.55%)!

The S&P 500 was down 79.92 points (down 6.66%)!

NASDAQ was down 174.72 points (down 6.90%)!

All bets are now off!? These indexes have broken below the trend lines. Do we drop another 800-1,000 points or do we now start to settle down? I'm staying in cash. This market is simply too volatile and too undependable. Yes, the Standard & Poor rating agency dropped the United States' credit rating from AAA to AA+, but was that really enough to cause all of this turmoil in the market?

I say no. I still believe that the FED kept the stock market artificially inflated for at least a year. We should have "crashed" last summer. Quite simply, the FED has been holding down the financial head of a "jack-in-the-box" stock market. When QE2 (Quantitative Easing) ended, the proverbial stock market "jack-in-the-box" popped out of its box (bopping and weaving in all directions). In short, this artificially inflated stock market returned back to where we probably would have been without QE2.

Now I hear Republicans blaming Obama, Democrats blaming the Tea Party, and others blaming a lack of overall leadership in Washington. All or part of this may be true, but more importantly, you can't have a free market economy if the FED institutes artificial  supports. I spoke about this earlier in this blog. I still say, "Get rid of the FED!"

In any case, it's almost enough to make me want to move to Amsterdam or Canada. Anyone want to join me?

Peter Gottschall (PG1)

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August 10, 2011

I love this stock market! Again, I didn't follow my own advice. I shorted the market yesterday at about 12 Noon when the DOW was up over 200 points or so. Then Bernanke and the FED minutes came out and the market sold off after 2:30 pm. I then sold my 300% leveraged SPXU and got out in time because to my shock and amazement, the DOW went from being down over 200 points to rallying approximately 600 points in the other direction to end up 429.92 points at the closing bell.

Amazing! Yes, this is a risky market, but I believed shorting the market when it was up over 200 points was basically a "safe" move. Traders often get nervous before the FED speaks, so it seemed logical to think that the
market would turn south -- which it did -- but I got out in time because I believe in the adage, "Bulls Make Money, Bears Make Money, But Pigs Get Slaughtered."

In short, it's often a mistake to hang on waiting for more. Take the money and run. Especially in this type of market. When things settle down -- which they'll do eventually -- it'll be safer to buy and hold.

In the meantime, stay in cash the rest of this week. Next week the market may settle down. But as I always say, you have to watch the market throughout the day to see what's going on. Things can change. Especially in this market.

Peter Gottschall (PG1)

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August 15, 2011
 (and  UPDATE)

We've had three nice up-trend days in the stock market. It looks like the market has finally settled down. Personally, I think it's "safe" to get back in the stock market waters. The volatility of this past month, and last week in particular, is fading into the background. But don't be too surprised if the S&P 500 tests last week's low again. At its worst, the S&P 500 was down at 1,101.54 on Tuesday, August 9th. Could we go there again? Sure. But more than likely, we may retest down to 1,150 to 1,175. I don't know if this will occur or not, but many traders think the S&P 500 will indeed retest last week's low of 1,101. This doesn't mean it'll happen, but if it does, it will certainly be an excellent buying opportunity for stocks.

Currently, the S&P 500 is at 1,204.49.

In any case, this will be my last post for awhile. I believe the market will be relatively "safe" until next summer. But we'll probably be trading sideways for awhile. That's not to say that there'll be no movement at all. We'll be up and down as the aftershocks of last week settle down. Last week we had massive moves in both directions. It was the first time in the stock market's history that the DOW ended up or down over 400 points for 4 consecutive days. There were also massive moves during the day before settling up or down over 400 points at the close. Just for comparison, this didn't occur after 9/11 or even after the 2008-2009 stock market crash (the "too big to fail" banking and financial crisis). That being said, the swings are getting smaller. That's good. The market is settling down.

There's also an old adage: "Sell In May And Go Away." There's a lot of truth to that statement. April is the end of the 1st Quarter and lots of traders "back off" from the market or start shorting stocks. Regardless of the reason, the stock market often starts selling off every April -- especially if the first quarter has been positive. So we're probably OK until the end of next March 2012.

But once again, I believe the stock market will be relatively safe for now. At least until next year. I believe the next potential "crash" and/or "major correction" will occur next Summer when all the problems of this country and the Eurozone will again come back to bite us again. The President and Congress have simply "pushed the can down the road." The problems have not been solved. They've simply been set aside. They will certainly come up again, especially in a U.S. election year.

Other factors also indicate a double dip and/or major correction next Summer. But I really don't believe it'll happen this year.

Also remember that the stock market will go up, and it'll go down. We will still have down days. That's just the nature of the market. But bottom line, the worst is probably over. We won't get a double dip this year. Once again, this will more than likely occur next year. That being said, the S&P 500 will probably not exceed 1,370 this year, and the S&P 500 will probably end / close this year somewhere between 1,325 and 1,350. Unless something really changes, I will trade accordingly.

So good luck folks. I'll probably "see" you next Summer. Good trading!

Peter Gottschall (PG1)

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July 11, 2012

I have officially discontinued my long running "Stock Market Crash Blog." Many thanks to all of my readers who've been with me over the last four years (since I began blogging before, during, and after the stock market crash of 2008-2009). I sincerely appreciate your patronage. My very best wishes to all of you. And continued good trading to all!

PG1
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August 19, 2012

I've received many requests to repost my original blog. I won't be adding anything to it, and I will restore it 100% from my backup database file -- in its entirety -- without any changes. Many of you are looking to see how accurate my predictions were about the stock market. Well, here is my original blog, unchanged, complete, and in its entirety. Thanks for your interest.

Best wishes,

Pete Gottschall (PG1)

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January 15, 2016

It's been a long time since I've written anything in this blog. I don't know if anyone will really read this. Most of my readers have assumed that I've given up on writing about the stock market, but I've decided to add this entry anyway.

This month has been the worst January since the stock market crash year of 2008. Finally. All I can say is that it's about time. I haven't done any significant investing for the entire year of 2015. I simply did not trust stocks. As previously mentioned, the stock market has been artificially inflated and manipulated by the FED for almost 10 years. The FED should have raised the interest rate in 2014 (or even 2015) when corporate earnings were good. But now that they have finally raised the interest rate by 25 basis points (.25%), the market is finally starting to correct.

Granted the market has also been affected by the dramatic drop in oil. Oil has now dropped below $30 barrel (the average price had been approximately $90 to $120 per barrel for several years), and now that the Iran sanctions are about to be lifted, another half a million barrels a day will be coming onto the market. This should lower the price of oil even more. But I applaud the low price of oil. Most Americans are pleased about this too. Gasoline and heating oil and even propane (all of these are affected by the price of oil) are now at the lowest prices in many years. And oil may actually drop much lower. I hope it does.

But more importantly, the market is finally starting to correct. I'm hoping for a 20% correction before I get back into the market. I'd like an even bigger correction. I know how that sounds. Some may think that a correction is a bad thing. It's not. Due to the artificial manipulation of the FED, the market has gone up for almost ten years without a real correction. Corrections are necessary. They are important. It now looks like we're finally going to get one. That's good. The only drawback is that everyday folks who have a 401k or an IRA retirement fund are going to  take a hit. But it'll probably be temporary, although I don't think the market will really bounce back significantly until the second half of this year.

In fact, we might not see a real gain in the S&P 500 or NASDAQ or the DOW for the year (final annual return), but if you get in at the bottom of this market correction within the next six months or so, then you might be able to get a nice 20% return or better by the end of this year.  I can't guarantee this of course. Don't make your decisions based on what I say. It's my opinion, however, and I'm sticking with it --  and I'm going to invest accordingly.

But watch out for the FED. I have a very low opinion of them. The FED may actually end up lowering the interest rate again -- back to zero! This would be a mistake. It's only .25%. Give me a break! Janet Yellin should be fired and the FED should really be eliminated. And Jim Cramer of CNBC and Wall Street in general should just shut up and stop complaining about a .25% interest rate.

Best wishes -- and a Happy New Year.

Pete Gottschall (PG1)


ADDENDUM:

and of course, then there's China...

China's been manipulating their economy and their stock market like no one else. They are now affecting other world economies.

One of these days I'll write another entry about all of this. At least one more blog entry.

PG1

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February 10, 2016

Here it is: my last blog entry for awhile.

First of all, the S&P 500 is currently at 1895.58. The market has been up and down. Mostly down, but we are up 5% from the recent lows; however, we are still down over 7% for the year. It has been a very tumultuous start to the 2016 market.

Even though the market is up 5% from the recent lows, the general consensus is that the market will start to sell off again when the S&P500 hits 1950 (or somewhere around there). This seems to be the upper trading range for the current stock market.

Here are other reasons why I think the volatility of the stock market is not over and why we will still be seeing a major crash -- or at the very least, a major 20-30% correction -- sometime this year.

Financial stocks (i.e., banks) were recently at multi-year lows. This is a group that should show leadership. It's the second largest sector of the S&P500.  And it's not just U.S. banks that have been at multi-year lows. Banks around the world have been hit hard. Even Germany's biggest bank, Deutsche Bank, has been performing very poorly. In fact, most financial markets around the world are experiencing bear markets. They have been down more than 20% from their recent highs in 2015 (i.e., Germany, China, Brazil, and Russia, etc).

And here is why banks have been hit so hard. It correlates with the price of oil. Oil is under $30 a barrel. Natural gas is also at multi-year lows. That being said, banks have loaned billions of dollars to oil and gas speculators. With the precipitous drop in the price of oil, dozens of oil companies have gone bankrupt. These oil companies purchased drilling equipment and drilling rights, etc. to search for oil. Remember, oil used to be $90 to $130 a barrel. It's now under $30 a barrel. There's no longer any profit in expensive oil speculation.  So why is this important? Banks have loaned these oil companies a lot of money. A lot of money!!!

Fortunately, smaller oil companies that have gone bankrupt are not going to disrupt the stock market very much, but big oil companies like Chesapeake (CHK) had borrowed big to speculate in key shale oil exploration. Previously, Chesapeake made very large acquisitions and incurred a lot of debt related to natural gas exploration. Chesapeake then got involved in searching for oil while the price of oil was rising. Chesapeake is now approximately $16 billion in debt.  So with natural gas and oil at multi-year lows, Chesapeake will have approximately $500 million in debt due next month. This could hurt the market. Banks are likely to be hit hard, and as mentioned, financials are the second largest sector in the S&P500.

Here are my other reasons to predict that a crash may be coming. There have been approximately 35 attempts in the last two years where the market attempted to rally only to sell off again. Every rally has failed. 2015 was basically a flat year. And the S&P 500 will likely fail again when it reaches 1950.

Growth in the world is also shrinking. This includes the second largest economy in the world, China (the United States, of course, is the largest). There is no real earnings growth, and central banks don't have any more bullets in their financial arsenal to fix global economies. This includes China. We are now in a flat global economy and everything in this world is interrelated. All economies are connected. We're also in a huge deflation bubble because of this massive credit bubble. For example, central banks had $2.1 trillion on their balance sheets in 1995. It's now $21 trillion. This is an enormous expansion of credit which has caused an enormous evaluation bubble. Debt in the world has gone from $40 trillion in the mid 90s to $225 trillion today. This is peak debt. It's basically a massive overinvestment in everything!

Even China is drowning in excess capacity. For example, they created billions of tons of steel without a demand for it. It's another way China has manipulated its economy. It's not real. It's not based on economic demand.

I could write more, but now I remember why I stopped writing this blog. Writing about it doesn't change anything. And as I write, I feel the futility of not being able to prevent the problems that are probably coming. It's like watching an animal suffer and not be able to do anything about it. At least when you see a deer on the side of the road that's been hit by a car, you can stop, call the police, and they can put the poor animal out of its suffering.

But what can you do about world economies that are suffering -- with central banks like the FED and the European Central Bank (ECB) trying to artificially keep economies afloat?

There's not much you can do accept wait and watch. And as long as Wall Street can make money on the greed that exists within a stock market that's artificially manipulated by central banks, a necessary correction will be held off until there's nothing left to stop it. You can only hold down the head of a jack-in-the-box so long before you have to let go.

Be well people and best wishes.

Pete Gottschall (PG1)

ADDENDUM  2-12-16

Just wanted to add this one last fact:

As of yesterday, the following major banks were down / underwater by the following percentages:

Credit Suisse:     Down 39%
Barclays:              Down 31%
Deutsche Bank:  Down 30%
UBS:                      Down 24%

And oil, of course, is at 13 year lows. All of these figures are awful, but the banks may actually rebound somewhat as the S&P 500 heads back up to 1950; however, I don't think anything will really halt the major slide that will eventually occur within the next six months or so. My opinion is: let the stock market correct by 20-30%. Get it out of the way. We need a recapitulation. We need a major correction. It's been almost 10 years since we had one. The longer we delay this correction, the worse it may be when it happens.
 
PG1


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June 22, 2019

It's been awhile since I've posted anything here, but some of you have been asking about what I think about the stock market. Well, I don't want to get political here, but I refuse to invest in a stock market that is going higher simply on the basis of "Republican Wall Street Euphoria" -- based on Donald Trump being President. I honestly believe the stock market is based on a "house of cards." Wall Street Republicans seem to believe that everything is just fine, but I believe that a disaster is looming beyond the horizon.
 
And before you start accusing me of being another liberal who is bashing Trump, allow me to say that I am fiscally conservative (as a Republican) but socially liberal. I used to be a Reagan Republican. Over the years, however, I've become an Independent in the truest sense of the word. I can vote either way, but the Republican Party is not the same party as when Reagan was President. It's more of an obstructionist party. Republican stick together and vote in solid blocks against anything Democrats want to do. The irony is that Republicans project every negative thing they do onto the Democrats. Every negative thing they accuse the Democrats of doing, Republicans actually do themselves.
 
I also don't feel that I -- in good conscience -- can invest in the stock market while hoping for a 20-30% stock / equity correction. I really think that would be a good thing. The stock market has been artificially inflated for far too long, initially by Fed Chairman Bernanke -- and then even further manipulated by Fed Chairwoman Janet Yellen. The FED is supposed to be an independent entity, but I don't really believe that anymore.

The stock market needs to go through normal, periodic, and natural stock market corrections. Unfortunately, artificially manipulating the stock market only creates the illusion that nothing is wrong. That everything is just fine.

So -- I choose to stay out of stocks; however, I like Gold, either as an ETF (i.e., SPYDER Gold Trust, ticker symbol "GLD") or as actual gold bullion or gold coins. The problem with actual physical gold, however, is that you can't sell it for what you pay for it. Most merchants who buy actual gold will buy it for 25% less that what they sell it for. As far as I'm concerned, that's too much.

In any case, I wanted to respond to all those who have asked for my thoughts on stocks.
 
Stay safe and be well. And be careful.

PG1
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