<p>And on the housing “collapse”. My wife just got her 401K statement today and since 1/1/08 it is down about 20%. Now tell me about the housing mess gain. Unless you live in a few hard hit areas your home is not down 20%. I want blazing headlines and doom and gloom predictions about the stock market mess.</p>
<p>Our home is down 10% from last year, but I’m pretty sure it’s up more than 200% from when we bought it, so I’m not complaining. Most of our savings is in index funds, but some is invested with a private company who have been beating the indexes handily this last year. I’m impressed.</p>
<p>“I also heard another sad story from a friend of mine. This kid she knew got into her first
choice college (private) and the kid was the fourth child. The parents just told her
“sorry… the equity in the house is all gone… there is nothing to mortgage… we
can’t afford to send you.” The parents had been counting on another mortgage on their
home to send the last kid to college like the older kids. How sad.”</p>
<p>Sad but not for the reasons you suggest. What on earth is wrong with those parents? IF
you have the means to help your kids with college and chose to do so, great. But if you
don’t have the money to do that, mortgaging your house away again and again is just plain
stupid. Give the kids what you can and let them figure our (with y our guidance) what to
do so they can go to school. It’s called reality. Destroying yourself is stupid and
imature…</p>
<p>As for the person who said their wife’s 401k was down 20%. So what? if you are within 10 years of retirement you are supposed to be transfering your money to stable things that are not subject to the stock market. if you didn’t do that you either didn’t listen or you have crappy advisors in your plan. If you are still 10-30 years from retirement, this is the time to increase your investing.
You don’t go out and buy shoes when you hear they just went up in price. You buy them on sale. It’s the same thing with stocks.<br>
buy low…sell high. That is pretty simple but it’s the whole deal.<br>
buy low sell high. It’s low now…so buy. and if it goes lower, buy more. and more and more. If you can’t afford it, you can’t afford it but if you can, don’t complain because you are in a good position to prep for the future.</p>
<p>I like camping- although I think it is really sad that the first time that my H & I stayed in a hotel room by ourselves since our honeymoon ( which was only one night since I was in the hospital the next day :p), was the night after we took D#1 to COLLEGE!
( I don’t even know what bedbugs * are*)</p>
<p>But I love camping- I live in the Northwest, how could I not ?
[North</a> Cascades National Park Service Complex (U.S. National Park Service)](<a href=“http://www.nps.gov/noca]North”>North Cascades National Park (U.S. National Park Service))</p>
<p>“I want blazing headlines and doom and gloom predictions about the stock market mess.”</p>
<p>Doom and gloom: [Welcome</a> to PrudentBear.com](<a href=“http://www.prudentbear.com/]Welcome”>http://www.prudentbear.com/)
Banking Deathwatch: [ClearStation</a> : Member Discussion : <em>COMPX](<a href=“Page Not Found”>Page Not Found)
Chickens are flying high: [ClearStation : Member Discussion : <em>COMPX](<a href=“Page Not Found”>Page Not Found)
Pawnshops are doing a brisk busines: [ClearStation : Member Discussion : _COMPX](<a href=“Page Not Found”>Page Not Found)</p>
<p>(the last three are from a friend of mine - he’s a Banker in Manhatten Beach.</p>
<p>“buy low…sell high. That is pretty simple but it’s the whole deal.”</p>
<p>Or sell high and buy low. Or just sell high and you don’t have to buy if they go bankrupt. Or buy low and hedge with put options on a rally. Or buy low and sell high on a spread play. Or buy low but get stopped out if the stock drops below your predetermined stop loss.</p>
<p>“buy low sell high. It’s low now…so buy. and if it goes lower, buy more. and more and more. If you can’t afford it, you can’t afford it but if you can, don’t complain because you are in a good position to prep for the future.”</p>
<p>The rules of trading: ([The</a> Rules of Trading](<a href=“http://www.gold-eagle.com/editorials_05/mauldin012106.html]The”>http://www.gold-eagle.com/editorials_05/mauldin012106.html))</p>
<p>R U L E # 1
Never, ever, under any circumstance, should one add to a losing position … not EVER!</p>
<p>Averaging down into a losing trade is the only thing that will assuredly take you out of the investment business. This is what took LTCM out. This is what took Barings Brothers out; this is what took Sumitomo Copper out, and this is what takes most losing investors out. The only thing that can happen to you when you average down into a long position (or up into a short position) is that your net worth must decline. Oh, it may turn around eventually and your decision to average down may be proven fortuitous, but for every example of fortune shining we can give an example of fortune turning bleak and deadly.</p>
<p>By contrast, if you buy a stock or a commodity or a currency at progressively higher prices, the only thing that can happen to your net worth is that it shall rise. Eventually, all prices tumble. Eventually, the last position you buy, at progressively higher prices, shall prove to be a loser, and it is at that point that you will have to exit your position. However, as long as you buy at higher prices, the market is telling you that you are correct in your analysis and you should continue to trade accordingly.</p>
<p>R U L E # 2
Never, ever, under any circumstance, should one add to a losing position … not EVER!</p>
<p>We trust our point is made. If “location, location, location” are the first three rules of investing in real estate, then the first two rules of trading equities, debt, commodities, currencies, and so on are these: never add to a losing position.</p>
<p>R U L E # 3
Learn to trade like a mercenary guerrilla.</p>
<p>The great Jesse Livermore once said that it is not our duty to trade upon the bullish side, nor the bearish side, but upon the winning side. This is brilliance of the first order. We must indeed learn to fight/invest on the winning side, and we must be willing to change sides immediately when one side has gained the upper hand.</p>
<p>Once, when Lord Keynes was appearing at a conference he had spoken to the year previous, at which he had suggested an investment in a particular stock that he was now suggesting should be shorted, a gentleman in the audience took him to task for having changed his view. This gentleman wondered how it was possible that Lord Keynes could shift in this manner and thought that Keynes was a charlatan for having changed his opinion. Lord Keynes responded in a wonderfully prescient manner when he said, “Sir, the facts have changed regarding this company, and when the facts change, I change. What do you do, Sir?” Lord Keynes understood the rationality of trading as a mercenary guerrilla, choosing to invest/fight upon the winning side. When the facts change, we must change. It is illogical to do otherwise.</p>
<p>R U L E # 4
Capital is in two varieties: Mental and Real, and, of the two, the mental capital is the most important.</p>
<p>Holding on to losing positions costs real capital as one’s account balance is depleted, but it can exhaust one’s mental capital even more seriously as one holds to the losing trade, becoming more and more fearful with each passing minute, day and week, avoiding potentially profitable trades while one nurtures the losing position.</p>
<p>R U L E # 5
The objective of what we are after is not to buy low and to sell high, but to buy high and to sell higher, or to sell short low and to buy lower.</p>
<p>We can never know what price is really “low,” nor what price is really “high.” We can, however, have a modest chance at knowing what the trend is and acting on that trend. We can buy higher and we can sell higher still if the trend is up. Conversely, we can sell short at low prices and we can cover at lower prices if the trend is still down. However, we’ve no idea how high high is, nor how low low is.</p>
<p>Nortel went from approximately the split-adjusted price of $1 share back in the early 1980s, to just under $90/share in early 2000 and back to near $1 share by 2002 (where it has hovered ever since). On the way up, it looked expensive at $20, at $30, at $70, and at $85, and on the way down it may have looked inexpensive at $70, and $30, and $20–and even at $10 and $5. The lesson here is that we really cannot tell what is high and/or what is low, but when the trend becomes established, it can run far farther than the most optimistic or most pessimistic among us can foresee.</p>
<p>R U L E # 13
Do more of that which is working and do less of that which is not.</p>
<p>This is a simple rule in writing; this is a difficult rule to act upon. However, it synthesizes all the modest wisdom we’ve accumulated over thirty years of watching and trading in markets. Adding to a winning trade while cutting back on losing trades is the one true rule that holds–and it holds in life as well as in trading/investing.</p>
<p>If you would go to the golf course to play a tournament and find at the practice tee that you are hitting the ball with a slight “left-to-right” tendency that day, it would be best to take that notion out to the course rather than attempt to re-work your swing. Doing more of what is working works on the golf course, and it works in investing.</p>
<p>If you find that writing thank you notes, following the niceties of life that are extended to you, gets you more niceties in the future, you should write more thank you notes. If you find that being pleasant to those around you elicits more pleasantness, then be more pleasant.</p>
<p>And if you find that cutting losses while letting profits run–or even more directly, that cutting losses and adding to winning trades works best of all–then that is the course of action you must take when trading/investing. Here in our offices, as we trade for our own account, we constantly ask each other, “What’s working today, and what’s not?” Then we try to the very best of our ability “to do more of that which is working and less of that which is not.” We’ve no set rule on how much more or how much less we are to do, we know only that we are to do “some” more of the former and “some” less of the latter. If our long positions are up, we look at which of those long positions is doing us the most good and we do more of that. If short positions are also up, we cut back on that which is doing us the most ill. Our process is simple.</p>
<p>We are certain that great–even vast–holes can and will be proven in our rules by doctoral candidates in business and economics, but we care not a whit, for they work. They’ve proven so through time and under pressure. We try our best to adhere to them.</p>
<p>This is what I have learned about the world of investing over three decades. I try each day to stand by my rules. I fail miserably at times, for I break them often, and when I do I lose money and mental capital, until such time as I return to my rules and try my very best to hold strongly to them. The losses incurred are the inevitable tithe I must make to the markets to atone for my trading sins. I accept them, and I move on, but only after vowing that “I’ll never do that again.”</p>
<p>There are a bunch more at that website.</p>
<p>“Pawnshops are doing a brisk business”</p>
<p>Drives my W and W crazy. I never buy anything retail. Bought a bicycle today, as a self reward for having commonsense tooth #13 extracted.</p>
<p>
</p>
<p>I see myself as an investor and not a trader. I simply do not have the psychological make-up for trading.</p>
<p>I do add to losing positions but only with indexes and not individual stocks. It worked once and failed the other time.</p>
<p>In 87 after the crash, my reading of the market was that there was nothing to worry about. So, using my house (as collateral) and all the cash reserve in my portfolio, I jumped in with both feet. A year later, I quietly sold enough to pay off the debt and breathe a little easier.</p>
<p>In 2001, I tried the same trick again without the leveraging. Since I was no longer working, I found myself low on cash by 02. I had to make a choice among 1) starting my pension early 2) stop purchasing and perhaps redeeming shares at a loss, and 3) stop making contribution to my defined benefit plan. I seriously under-estimated the risk.</p>
<p>I reasoned that the best investment for the market condition was my inflation-indexed pension. So I stopped buying equity even though they looked “juicier” by the day. This lasted for almost another year before I was completely out of cash and had to take retirement. By then the market had turned north and my pension was sufficient to look after DW if something bad happened to me. My gamble succeeded, just barely. If I only knew how much it would cost to live without a salary/pension…</p>
<p>Oh well.</p>
<p>“I see myself as an investor and not a trader.”</p>
<p>Everyone is a trader. At some point you buy and at some point you sell. Or your broker or executor closes out your positions.</p>
<p>I found two things psychologically very hard to do many years ago:</p>
<p>1) take a loss on a position
2) short stocks</p>
<p>Getting through those two barriers paved the way for a lot of success.</p>
<p>Those are hardly major news outlets BCE.</p>
<p>Prudent Bear links to major news outlets. The others are from a trading board that I used to frequent. I thought that you just wanted a little doom and gloom.</p>
<p>The nice thing about the charts is that you don’t need any filters. The charts tell the story. It’s a lot more objective than the media.</p>
<p>“Those are hardly major news outlets BCE.”</p>
<p>[IndyMac</a> Bank seized by federal regulators - Los Angeles Times](<a href=“http://www.latimes.com/business/la-fi-indymac12-2008jul12,0,6071779.story]IndyMac”>Federal regulators seize crippled IndyMac Bank)</p>
<p>IndyMac Bank seized by federal regulators</p>
<p>The federal government took control of Pasadena-based IndyMac Bank on Friday in what regulators called the second-largest bank failure in U.S. history.</p>
<p>Citing a massive run on deposits, regulators shut its main branch three hours early, leaving customers stunned and upset. One woman leaned on the locked doors, pleading with an employee inside: “Please, please, I want to take out a portion.” All she could do was read a two-page notice taped to the door.</p>
<p>The bank’s 33 branches will be closed over the weekend, but the Federal Deposit Insurance Corp. will reopen the bank on Monday as IndyMac Federal Bank, said the Office of Thrift Supervision in Washington. Customers will not be able to bank by phone or Internet over the weekend, regulators said, but can continue to use ATMs, debit cards and checks. Normal branch hours, online banking and phone banking services are to resume Monday.</p>
<p>Federal authorities estimated that the takeover of IndyMac, which had $32 billion in assets, would cost the FDIC $4 billion to $8 billion. Regulators said deposits of up to $100,000 were safe and insured by the FDIC. The agency’s insurance fund has assets of about $52 billion.</p>
<p>IndyMac’s failure had been widely expected in recent days. As the bank was shuttering offices and laying off employees to cope with huge losses from defaulted mortgages made at the height of the housing boom, nervous depositors were pulling out $100 million a day. The bank’s stock price had plummeted to less than $1 as analysts predicted the company’s imminent demise.</p>
<hr>
<p>Charles Schumer is being blamed for starting the bank run on IndyMac.</p>
<p>There are about $1 billion of uninsured deposits (why would you make bank deposits that are uninsured or exceed the caps?) held by about 10,000 depositors. The expectation is that they will get about half of their money back.</p>
<p>The bank failure will cost the FDIC insurance fund from $4 billion to $8 billion and may mean that insurance costs to other banks will rise to shore up the insurance fund.</p>
<p>A good time to check your money market funds to see how much frannie and freddie the hold and your bank accounts to ensure that they’re not over the FDIC limits on insurance.</p>
<p>
</p>
<p>I guess you are more of a trader than I ever will be. As I said before, I made only about 5 major financial decisions in my entire life, and I am closing on 60!</p>
<p>Curious what folks thought about the “new” bailout. Did Paulson not say a few days ago that nationalization is not necessary? Maybe he is trying to do his friends at PIMCO a favour? I wonder if they will do the same with credit card loans, student loans etc.</p>
<p>Thanks to Watergate, I have learned not to believe these jokers that think of themselves as leaders.</p>
<p>Well, just received one financial statement. It is actually up for the quarter. 
</p>
<p>Congratulations. I suspect the next financial statement will be more telling.;)</p>
<p>All the best to everyone. This is going to be a long and hard recession. I really hope I am wrong.</p>
<p>I just gave sell instructions to the natural resources & gold holdings. I am also selling most of the European holdings - only down very slightly, propped up by the Euro. On the other hand, the world wide exposure - ouch. But I am still selling. I am going into cash in quite a significant way. It has more to do with what I want to do with our life though. We want to get a second (summer) or third home in other parts of the world and need the cash. I also want to get away from the markets for a while. I was getting too absorbed with the day to day gyrations and it’s detrimental to my health. :o</p>
<p>Although we note increasing costs everywhere we fortunately have not been hurt at all by the current economic situation. We both have Federal government retirements (which have built-in col increases), and my wife and I are currently employed full-time (respectively) by the State of Wisconsin and the University in somewhat senior level positions. I’ll start collecting social security in the fall having reached full retirement age and will keep on working. Plus the low mortgage rates allowed us to take a big mortgage and save a substantial amount of the profit we made on our house sale in NoVA. We haven’t yet had to go into our IRAs or (Federal government) Thrift Savings Plans yet. Our son has graduated from college and is mostly self-supporting.</p>
<p>We have an excellent health care plan through the University, and we retained our Federal health care plan into retirement. The State and the University both provide non-contributory retirement plans, and we are both adding extra pre-tax money to those plans.</p>
<p>If I were a Christian (which I am not) I would probably say we are blessed, but I prefer to think that this is my reward for having had to work for the Federal government for 30 years.</p>
<p>Oh, and I switched almost all of my investments into money market type portfolios before the worse of the market decline hit.</p>
<p>Our family lucked out. Husband’s current job has just offered him 4 year golden handcuffs. If he works there, we’re great - if they try to lay him off, we’re still very good (they have to still offer him much of the money and then he’s free to look for other work). I’m so glad this happened right at this time - with 2 kids going to college, my getting ready to transfer to a 4 year college and the unstable economy, we feel blessed to be in this position. We’re not rich by any stretch of the imagination, but we’re going to get through this next phase just fine as long as we make conservative choices throughout. We’re making back up plans in case the economy does a nose-dive and inflation goes through the roof and we’re being cautious about both small and mid-sized purchases (large-sized purchases already unrealistic with 3 of us in college - ha!).</p>
<p>Annika</p>
<p>While we are still okay, the writing on the wall is pretty scary. H’s company just announced HUGE cuts & changes. We found out a couple years ago that we won’t be getting the company-funded pension that H thought he was getting (thanks for letting us know 30 years into the game), and now we have learned that health care will be cut for retirees. H was <em>dumb</em> enough to be loyal to his company for more than 30 years, believing that the benefits we would be getting were worth giving up a higher salary that he may have made had he changed companies. Unfortunately, the company is not as loyal as the employee … obviously, market forces have had something to do with this, too. It’s just really tough to be middle aged & find out that our retirement is not what we thought it would be. With the salary freeze & increasing employee-paid share of health care, we are steadily losing ground … throw rising prices on that, and it’s not a pretty picture. That said, we have always lived conservatively, so we are okay so far. IF I ever get a job, we might even be able to tread water … my fingers are crossed.</p>
<p>Middle to upper middle class here. We have definitely altered our plans this summer and are combining errands, staying close to home, cancelled camp for our youngest, eating out less often, and not “running out for a gallon of milk” like we used to. The biggest setback has been our outrageous electric bills in a heatwave that seems neverending. This recession, whether real or not, is greatly concerning for my husband who manages our funds like a hawk. We have been so proud of our saving for college thus far, but have been scared silly after seeing that so many names on my son’s list cost $50K a year - hardly a drop in the bucket for anyone. We are deeply concerned about paying for a top notch school like this. They do not offer any merit aid and of course we won’t qualify for financial aid. I like to refer to us as STUCK IN THE MIDDLE. With two more coming up in the ranks, we will be feeling the financial pinch for many years to come - a fact that many on this board don’t acknowlege. It seems that around here you are deemed rich or poor. The reality is that the silent majority is footing the bill all by themselves.</p>