May 18, 2008

Buy stocks. Sell houses.


Here's the S&P 500 chart for the past three years. You'll note that most HP'ers went to cash last fall, and avoided the carnage through March. And then many of you have posted here or written me that you've gone back in and scooped up some bargains recently. Nice. And of course, a lot of HP'ers made a lot of money shorting REIC stocks these past couple of years. Again, nicely done.

I don't give stock picks here because when I have in the past (short or long) all we get is daily "HA! I told you! Countrywide is ROCKING! DOPES! CFC to $100!" kind of garbage. And many of us have been wrong about the general market before - thinking that it would fall further and earlier as housing crashed, although any stock connected to real estate and lending did.

So I want you all to be clear over the past few weeks that I've modified my neutral stance. Previously I was a picker, and not a bull and not a bear. I recommended buying good companies with good earnings with good P/E ratios and good future prospects. But now, when it comes to stocks, I'm a bull and have been buying 'buy and holds' with both fists over the past month and change. The last straw was Bernanke's bailout of Bear Stearns, which sent a message to the world that moral hazard is not a concept known to the US Fed.

So call me Larry Kudlow, call me Jim Cramer, call me what you will, but when it comes to good stocks - not any stock, not all stocks - good, solid, well run companies in thriving global markets, I'm a bull. I'll throw out one name so you know the kind of stock I like: Apple. 'Nuff said. (disclosure - I own AAPL of course). Also most of the stocks I own are foreign, or multinationals with significant foreign exposure.

So why the change in general outlook?

Because I firmly believe that Ben Bernanke and the federal government have fully committed to inflating a new stock market bubble, to bail out the housing bubble, which bailed out the last stock market bubble. And that's just the way it is. We're a bubble economy, and we need financial speculation to drive income and tax growth since we can't do it with jobs.

Reckless central banks around the world are also on board with The Next Bubble, which as you can all plainly see is causing soaring inflation, but so be it. Don't fight the Fed(s).

America has lost its manufacturing base. We're $53 trillion in debt and counting. Our currency has been debased (which artificially masked stock price declines, but not a lot of folks understand that). Our incomes are flat to declining. And damn, we're good at causing bubbles. And we're good at passing off the pain and day of reckoning to future generations. One day, that day will come. But thanks to "moral hazard? what moral hazard?" Bernanke, and the free spenders in DC, that day will be pushed out again.

The stock market may go up, it may go down, it may crash tomorrow, it may have wild days and weeks both ways. And you're supposed to "sell in May and go away" don't forget. So whether you're a bull or a bear (or neither), don't bore with the hourly and daily updates on which way things are going. But do feel free to share what companies you like and why.

And remember, stocks are not houses, and it's the P/E stupid - it's always the P/E stupid.

House prices have a long, long, long, long, long way to fall. Inventory is still massive, people can't get loans, foreclosures are soaring, it's significantly cheaper to rent than 'own', consumer perceptions have changed, and the massive fraud still has to be cleansed from the system.

Housing prices will indeed bottom one day. But that day is not here, not by a long shot. It's the P/E stupid - whether it's a stock or a house. And stock P/E's look sooooooooo much better than housing P/E's right now.

Finally, DON'T DO ANYTHING WITH YOUR MONEY BECAUSE OF SOMETHING YOU READ ON THE INTERNETS. Do your own research, make your own decisions, and have only yourself to blame - for acting or for not acting. Just like you did with the housing bubble.

Good luck out there HP'ers. Cash was king. Go make yourself some money with your money, let us know what you're up to, and if you agree or disagree.

Meanwhile, watch the market crash next week. That's how it works, right?

115 comments:

Shelly said...

Not so fast. By the way this article mentions your site. Read this first before you act on your post.

http://www.financialsense.com/fsu/editorials/gorton/2008/0516.html

keith said...

If you're looking for short-term trades, you're on your own. I have no idea what stocks will do tomorrow, next month or next quarter.

But I believe there are great companies with great prospects around the world that if you can, it'd be wise to go own 'em.

There's also some dogs to short...

Good article though in financial sense. One day the MSM will report that the government is lying when it comes to soaring inflation.

Owner Earnings said...

Keith, buying based on PE's? Consider that profit margins are still near all time highs. When they come back to normal those PE's will either be much higher or the stocks will maintain the same PE and be much lower.

I almost can't believe you posted that.

happy homeowner in the stix said...

Simple. Go for vice.

Buy the stock that produces your favorite firewater, or imports it, and enjoy. Load up on Altria. Check out this link to holdings in the Vice Fund and pick your favorite.

http://tinyurl.com/557vh7

People ain't gonna give up their booze and smokes, no way. Probably not their guns or gambling, either.

Face it, it's easier to walk away from a house than a drink for most of the lowlifes who brought you the bubble. Might as well cash in on it.

Anonymous said...

Are you being a hypocrite or did you bump your head, Keith?
The stock market was dishonest when the housing and tech bubbles were sci fi.
They will take your money, boy. Its what those greedy sob's do.
I cant believe you. You rant and rail against everyone who brought us the housing bubble from realtors to the president and here you are promoting the next bubble.

keith said...

just tellin ya how it is

do with it what you may

Reality said...

Keith,

For cyclical stocks, low-PE is idicative of tops not bottoms.

IMHO, the stock market is going no where fast, either up or down.

Anonymous said...

Fair enough.
But you better not blog about all those greedy people and P. Bush who pushed the stock market higher and higher untill it crashed leaving everyone and everything destitute.
Because that is what will happen just like the housing bubble. Engage in the powerbrokers game and hope and pray you get out before the smart money does.
I agree that Bernanke and boys are trashing the dollar in the slim hopes that they can prop up a stock market that has already used up its bag of tricks. All those pensions are tied up in it. When it goes everything goes.
With all that said I would be much more worried about preserving capitol then putting it at risk in another game they have rigged. Good luck with that.

Anonymous said...

Early on houses now early on stocks

Anonymous said...

RSX
EWZ
FXI
SPDR

Anonymous said...

Buy when everyone is selling and sell when eveyrone is buying

Yoski said...

Some stocks will fare terrible despite some recent recovery. Financials, and anything to do with building/real estate. Some of those companies will be out of business before this is over with. Also consumer discretionary (like Apple, BMW, etc.) will feel the pinch. The average consumer is broke. Last thing or their shopping list are tech gadgets and fancy cars.
Sectors that will thrive are energy (good time to get into uranium), health care & equipment (aging boomer population), agriculture (Monsanto for example), consumer staples (yes, boring companies like Proctor & Gamble or CVS) and mining.
The uranium stockpile from old weapons which is currently used as fuel for power plants will be depleted by 2011. China is adding a bunch of new capacity. Uranium at $60 is a bargain. Natural Gas is also severely underpriced when compared to oil.

Anonymous said...

I've been buying like a madman since January. When I posted that I was tarred and feathered here, including by Keith. Cash, cash and gold gold you all screamed.

What I bought back then is up 15% in 4 months. How's that cash and gold doing for you all. Inflation has wiped out 5% of your cash and gold is down $100 from peak. Well done.

Anonymous said...

http://www.financialsense.com

/fsn/main.html

Part 3 -

Water and uranium. It makes a lot of sense.

Mark in San Diego said...

I am in conservative blue chips with dividends. . .dividends will keep you warm (except financials) when the economy goes south. . .I agree, the Fed will have to create a stock market bubble to bail out the housing bubble. . .basically none of their plans are working - housing prices are still falling.

WiseOldPatriot said...

This market is clearly OVERBOUGHT

it has been going up despite worsening news and conditions.

illogical.

look for a 5-10% pull back.

same goes for oil... oil should pull back to 100.


The econ is baaaaaad.

Layoffs all over. My pals are hi end educated and can't get jobs...even for an insulting 5 figures.

wake up.

car dealers going out of biz all over. shutting down.. consolidating

even toyota is doing 0% for invoice pricing .

this is bad.

americans spending $150-600/mo on gas??? come on. that is up to 5 or 6 thou a year. INSANE.

summer driving season?? come on?? hotels are all empty. book what you want where you want.. major vacancy.

cruiselines. despterate. I see SANDALS commericials on all day long.

this is BEAR Market rally..... when stocks go up 100% IN WEEKS.

DRYS. SOLF. GOOD. BIDU. all insane. buy now and kiss your money good bye.

Anonymous said...

The 1929 crash was preceded by a Florida housing crash...

Broken peoples not buying no stuffing from companies.

Gabor said...

No one can say if Keith is right or wrong, but I looked at Apple and it says they have a PE of 38.72. I thought a fair PE was something like 10 and a good PE was something like 6. Also, I would not buy any company that sells to US consumers since we are not going to be able to charge it much longer.

Lisa347 said...

I dont see how you are any different compared to sheeple. You were promoting Obama bubble for a while. Now you jumped on Stock market bubble. I will not be surprised if you jump on Housing bubble one of these days.

Anonymous said...

Apple, huh?

I do seem to remember a small crash just a little bit ago. Now, it's almost at its all time high!

If there is one piece of bad news that comes from Apple, it will come crashing down, again, hard & fast.

I think Apple will feel the pullback very soon...

SpiceUpYourPortfolio said...

If you must buy stocks, the pls put your money into commodity based stocks. Some of them really do pay good dividends too. You can email me and I will be more than happy to provide the list.I will still advise folks to exercise extreme caution with the general stock market. If you believe in cycles like I do - there will be some dangerous planetary alignment coming up (Saturn opposing Uranus) which signals a crash.

Remember their goal is to deceive common people like us. Dont get sucked into it. These monsters are sucking America dry.

Foreign funds buying corporate debt are decreasing. So guess who ends up buying these bad toxic corporate debt? It is us through the Federal Reserves and better start believing folks, they are using the funds people deposit to buy Treasuries to bail our their buddies!!!

These may be too complex for some people to agree with me.

Arm yourself with knowledge and you can defeat even the "strongest" and the "mightiest"!!!

devestment said...

I think good buys can be found in any market, but stocks are not my play right now. I agree with the poster that said it is early for stocks to rally again, perhaps years. When I look at the long cycle I see the Government reacting to economic issues well after they have become a problem. My guess is that the next bubble we have is in interest rates. High interest rates behind the curve pretend to solve the inflation problem while allowing the US to print mass quantities of currency for the rich, strengthening the dollar and keeping foreign surplus cash from flooding the market while the existing cash sweeps up bargians.

I remember all to well the Volkner years…

Paul Volkner, then chairman of the Federal Reserve, drastically cut the money supply by raising interest rates -not until 1979. The resultant economic downturn coupled with rising gas prices…

Sound familiar?

Same as it ever was.

Right now I see the economy in flux. Times are not particularly bad or good. It is a mixed bag. I think the big money is waiting on the sidelines for bargains and an opportunity to force governments to pay high interest.

gadfly said...

Keith is right folks. It's time to position yourself for the next bubble before it's blown. Go with the flow, and profit from Messrs Bush and Bernanke's desperation to avoid a recession.

Anonymous said...

Stocks are my area and what Keith is advising contradicts his own advice.

First of all, stocks are NOT cheap.
The S&P historical norm is about 15and right now the S&P is about 23.

New bull mkts begin when the S&P is at a discount in single digits.

Look it up. This is fact.

Secondly, Keith is sounding like the housing guys who bought thinking housing only goes up.

The complacency is extremely high right now. In fact, the VIX is at about 16, the lowest low for 2008.
The last time it got this low was in October when the DOW began its multi-month sell off.

Bulls are giddy now and the sentiment is "just buy the highs, it can only go higher."

One very telling omen, however, is that volume has been very light.

Malcolm said...

I have to confess that last month I moved back into the market. As many of you know, I’ve been a long-time fan of cash only; but with Uncle Ben and his gang getting drunk on lower rates, the interest paid by my banks was just a waste of time.

Their continued lowering of rates, while good for those who need to borrow money, is poison to those of us who are looking to earn interest. 1-2% from a bank is a joke.

So, I bit the bullet and went about 50% out of cash back in the market.

Here’s what I’ve done… (and like Keith, I’m no stock expert, so don’t listen to me)….

I went with only stocks that have paid dividends for at least 20 years; and stocks that have automatic dividend reinvestment.

I looked to invest in markets that are fairly constant regardless of what the overall economy does. So, I split it between three industries:

- Garbage
- Electrical Utilities
- Toilet paper manufacturers

Sure, they’re not the most exciting of stocks; and no, it doesn’t give you much bragging rights at parties (hello, I’m into garbage), BUT… they’ve averaged dividends in the 4-5% range for the last 20 years.

So, you don’t make money (like most) with the rising and falling of the share price; but you get long-term steady growth via dividends. Stick your money in, forget about it and let it ride for 10 or 20 years, and you’re doing OK.

I stole this technique from my father (who has done the same with other stocks); and it’s downright amazing how this can add up over the years.

Yoski said...

To crash or not to crash?
In November are elections and politicians being politicians they will do everything in their power to keep the market happy. All the incumbents that are up for re-election would like to keep their jobs, so they'll spend money like drunk sailors. Don't forget the Olympic games in China this summer. China doesn't want anybody to piss on their parade either. This summer will be a happy time for stocks and a good time to accumulate some more precious metals. We could see a nasty change of the investment climate right after the election but until then I think we'll be OK.

guest said...

I just had to post this to get it out of my system. Bush lovers do not watch it.

Part 1:
http://www.youtube.com/watch?v=qr8nrRZOpXw

Part 2:
http://www.youtube.com/watch?v=hrDnpYDQauw

Lady Di said...

I wish I could believe in the market right now, but I can't. I am staying on the sidelines for now.

Joe Momma said...

I totally agree. In fact I just changed my investing positions recently to match what you're saying.

I've been noticing that all the news is horrible on the financial front, many of the gov. reports are manipulated or flat out lies yet the market doesn't go down. Bottom line is people are irrational, that's why the housing bubble and the internet bubble existed in the first place. Very few understand the precarious position of the economy and if the drumbeat of bad news day in and day out doesn't make them sell I think the slightest hint of something positive will shoot everything upwards (eventhough the fundemantals are horrible).

Housing just can't go down forever, it's down 29% YoY in Sacramento, and about 15% in the bay area. I mean it's still overpriced but the rate of depreciation has to slow sometime, and when one of those reports comes out showing this the dopes will buy stocks en masse.

Anonymous said...

Long term the stock market outlook is the same as housing. Old people selling houses and stocks to retire. Look at Japan if you want to know where the US is headed. The Nikkei is worth about the same today as it was 20 years ago.

Don't count on GenX and GenY to continue inflating assets. They will spend their stagnant incomes on food, gas, and ipods. Some energy, agriculture, and tech companies will do well but future growth is already priced in so there is no sense in buying even these, just look at Apples 39 P/E.

mickeyc said...

Bear market rally.
I find it strange that someone that can so clearly see one financial area of life can be so blind in another.
There is money being shoved into the system through every back door method possible. It is sinking into the black hole of enormous losses.
The Diamonds DIA (Dow) is down less than 3% compared to one year ago. This is everyones "once in a lifetime" buying opportunity?!
And if you're suggesting buying Apple AAPL? It's close to its all time high (over 6 times its valuation at the top of the tech bubble) and is up over 72% over the last year.
You have the American curse of believing in the omniscient power of your government Keith. The Fed cannot fix this.
Everyone thinks they are Warren Buffet now: "Buy when everyone is selling and sell when eveyrone is buying" Sorry to be the one to pass on the news, but EVERY middle class investor is pouring whatever they can find into the market now. This is not a contrarian play, it is the status quo.
The eensy weensy problem with this is that everyone is already in. With the huge squeeze in personal budgets where do yo think the extra cash is coming from?
Invest now and you are the greater fool.

Anonymous said...

Good Post. You may be right. The market may be the next bubble, I urge caution to those who bare no battle scars yet.

The market is a casino. Researching and putting lots of effort into a stock pick often result in no better performance than throwing darts at the WSJ.

Why? Because it is rigged to the core. PE ratio? Merril Lynch (ML) has a PE of -$15, NEGATIVE. Yet last week, in yet another financial stock sector reach-around, BofA said the stock should be selling for $10 more a share than it is??...????

Next week ML will probably issue a buy recommendation on BofA.

Bears that did their homework knew CountryWide was dying last spring. Smart money was shorting the stock. Then Mozillo came out and said his company was like a finely tuned athlete and had very little exposure to subprime. The stock shot up, the shorts got slaughtered, Mozillo cashed out. It finally came out Mozillo lied like no one with a soul can, but too late for those people who made a seemingly wise and researched desicion to short CW.
Wash, rinse, repeat.

The people with the real money can manipulate a stock much longer than small investors with their well thought out investment strategies can stay solvent.

Good Time Charlie

W.C. Varones said...

I generally agree. I've been bullish on stocks because inflation is the only way out of this mess. They are going to kill the dollar.

Be long stocks, but not all U.S. Get thee some foreign, some emerging markets, some precious metals, maybe some foreign bonds and foreign currency.

I do most of these through very efficient ETFs.

Andrea Gressinger said...

aapl will be the same price 5 years from now as it is today.

I'm in:

CLX (thought is was going private - oops)
NTDOY (just STARTED making money on wii)
PHO (clean water - is the next commodity)
MGU (global infrastructure fund)

I am short:

FXI (25% of earnings of chinese stocks are from gains in the chinese stock market - SCARY)
AMZN (great retailer, but recession is coming and it's trading at 65+p.e.)
KBH (no comment necessary)

booooo said...

remember that there was a hangover after bill clinton. so, yes, jobs don't create enough wealth to drive the economy but it does take labor to transform the economy.

W.C. Varones said...

P.S. Even though they are going to print money, they can't create a "stock market bubble to bail out the housing bubble."

Stocks are not as widely held as houses. A stock market bubble won't put enough cash in the hands of stupid consumers to replace mortgage equity withdrawal.

LibVet said...

I agree with gabor.

Show me something with a P/E ratio of 8. That might get my attention.

sam said...

Long electrical power plants.

Plug in hybrids will be available in mass quantities in 2011. Using night time generating capacity will improve the return on capital for these companies immensely.

Also GAF- Middle East North Africa ETF

Anonymous said...

Who will buy all the stuff when people keep shelling out sheckels for gas and food?

keith said...

Good point on AAPL - it is my highest P/E stock, but I love their products, their management and their future prospects - B2B and B2C. Plus I enjoy that 50% of their revenues come from outside the US and building. But in terms of P/E, they're expensive. Sure have enjoyed my 30% gain this past month since buying though... And wait until you see where they are two years and five years from now...

I'll give you a few more. GE (p/e of 7 with a 3.8% dividend, recent trouble but solid company and good entry for a long term play) the IF etf (p/e of 12.7 in a stable market you should look at). I also own HNZ, p/e of 19 dividend of 3.1%, and a business I understand. It's flipping ketchup, and they'll get bought out one day. If Wrigley can sell, Heinz can sell. But do your own research.

I like the poster with the garbage plays but you have to consider will even garbage get his by all the vacancies and foreclosures?

Picking stocks should be fun. Do your research. Don't just jump in. Understand what Bernanke is doing, and invest wisely.

Anonymous said...

stock = asset
home = asset
gold = asset

asset = down

Thats all you need to know.

Though, the us stock market is denominated in dollars and I'm not sure its bid/ask has much meaning anymore.

Anonymous said...

keith = dopes

keith said...

trust me, I fully expected to get flamed with this post since over 85% of HP'ers are neutral or bears.

But if you come to HP to hear what you want to hear, after 2 1/2 years, you must have figured out you're in the wrong place

I think one thing we can all agree on is that home prices are going to keep falling, and fall even faster than they have.

You should also be able to see that "cash is king" paid off - you went to cash instead of Phoenix condos. You went to cash instead of REIC and banking stocks. You win.

But now, it's time to use some of that cash. Wisely.

First bull call in the history of this blog. Time will tell.

Anonymous said...

ConocoPhillips all time high this week, nice pick there!

keyser soze said...

keith said...
If you're looking for short-term trades, you're on your own. I have no idea what stocks will do tomorrow, next month or next quarter.

The technicians, aka the elves know.
Candlesticks, bollinger bands and all the other hocus pocus....just listen to them, they'll tell you. Bullshit Baffles Brains...and TA is nothing but a large steaming pile of it.
It never ceases to amaze me the amount of airtime the elves have been receiving the last 5 years!
Fundamental analysis w/a knowledge of MPT will always win the day. MHO

West Coast Willie said...

Keith

I appreciate your sticking your neck out but I think you are wide of the mark. Read some of Jim Jubak's recent columns. This looks like a bear market rally. Listen to Davidowitz on what's happening in retail. $150.00 a barrell oil is coming. You can kiss the consumer goodbye. That is what drives the economy. The Fed doesn't have some brilliant master plan. Bear Stearns was an ad hoc fix. They are just hoping things turn out alright.

Two recommendations for immediate action: Buy AAPL July 150 puts. Buy RTH July 95 puts. I'll see you 150% on the upside in about 3 weeks.

Anonymous said...

xom
cop
vlo
pbr
oil

keith said...

The sky is not falling. Yes, home prices are sky-high, but we really don't have a housing bubble that is anywhere near bursting

- Jim Jubak, MSN columnist, June 2005

http://housingpanic.blogspot.com/2007/07/hps-housing-bubble-moments-of.html

West Coast Willie said...

Touche, Keith but if you look at Jubak's track record, he has consistently beat the averages.

Anyway, you don't address the point about the tapped out consumer. Where are Mr. and Mrs. Too Much Home Buyer going to get their money?

Tara said...

All I can say is "your nuts"

Anonymous said...

Dow's down well over 10% in dollar terms

"Our currency has been debased (which artificially masked stock price declines, but not a lot of folks understand that). "

Anonymous said...

"you're" not "your" is all I can say

Anonymous said...

physical gold and silver are the way to go. i see no end in sight either. the good part about it, is that you have untaxable gains(if you do not sell) and since physical gold and silver holders are long term investers, or whatever, there is no problem with that. also physical gold and silver will always beat the markets in the long run. since i started in 2005, i have always had a minimum of at least 20 percent gains on my holdings and the good part about it, is that i do not depend on anyone else to tell me anything. if i want to see it, i just go and look at it.......i do not trust the markets these days. keith, it has been shown on many blogs that the gains made in investing in stocks have always been greatly exagerated. plus, the way things are, i trust stock brokers about as far as i can throw them these days. which brings us to treasuries and the talk of problems in the bond markets that is coming. for the life of me, i cannot see anywhere that is safe to put money except in real money in this day and time. so sorry. i shall not invest in stocks at this time. the 90's are over now keith. it is a new day now. it is the time of commodities. and i am surprised to hear you offer this sort of advice on this blog. however as you say, its caveat emptor...

Anonymous said...

Blogger keith said...

The sky is not falling. Yes, home prices are sky-high, but we really don't have a housing bubble that is anywhere near bursting

- Jim Jubak, MSN columnist, June 2005

http://housingpanic.blogspot.com/2007/07/hps-housing-bubble-moments-of.html

May 18, 2008 9:15 PM<<

you realize of course keith , that many of the big finacial institutions in this world are now officially technically insolvent and if was not for the taf windows they created , they would have already had to fess up about the junk on their balance sheets. but since they are being given a reprieve somewhat, one can never know exactly how this is going to play out, but the thing that bothers me is that somehow my butt is telling me that the american taxpayer is going to be used as a backstop to bail out these institutions on their bad investments. if this is done and i think they will do it, then the slack will be taken out somewhere along the lines. you cannot cheat when it comes to the physics of the financial world. if you take here, you will have to give at another place. the bond market will not accept a bail out on this issue. if you notice the ten year treasuries aren't paying squat anyway right now. all it takes is for some large holder of these bogus intruments to say , enough is enough....we are just that close even now. financial armagadon is somewhere in the future. no one knows where it is right now but many are saying sometime later on this year. frankly imho, this is not the time to be getting into stocks. maybe later after the smoke clears and we see who is left standing.....

Anonymous said...

But if you come to HP to hear what you want to hear, after 2 1/2 years, you must have figured out you're in the wrong place
<<<

yes i understand fully what you are saying especially after you switched from paul to obama. i read you loud and clear. i will say this though keith. you are a good sport about allowing contrarian points of view to say a few words around here and for that i am thankful. at least you don't get mad and ban people like karl denniger over at tickerforum. you have to walk on glass around there or else he will show you the door.

Anonymous said...

Buy China India and Russia and retire young

Anonymous said...

Anonymous Anonymous said...

Buy China India and Russia and retire young

May 18, 2008 9:57 PM<<<

that's what jim rogers says. he is also a strong advocate of getting rid of the FED too. he is putting his money where his mouth is too....he said i believe, earlier this year, that he wanted to try and be out of dollar denominated assets by the middle of this year.....hmmmm

shtove said...

Interesting.

The guy who runs the UK's #1 house price crash site (ha ha! no link, since site is down ATM) is a short term bull on stocks - mind you, I think he's predicting the indices, which may be a different take from yours.

I reckon your view is reasonable, although the selection has to be veeeery precise. And it's reasonable because based on past performance by CBs.

The risk is that we've heard that kind of past performance analysis before elsewhere, and it hasn't fared so well ...

Anonymous said...

BUY!

Tanker said...

Re: It's all about the P/E, stupid?

Keith, if you were looking at P/Es you would see that stocks are not cheap now. The S&P is selling at over 19X TTM earnings and the projections are pure fantasy. I would love for someone to explain to me how corporations can increase earnings by 18% when their input costs (PPI) are going through the roof and they haven't been able to pass on those additional costs to consumers(CPI).
Margins are contracting, which will result in stock multiple contraction.

The economy is still deteriorating with four straight months of job losses so far. The home ATM is shut down (800 Biilion per year last six years). The consumer is in serious distress, and that won't change anytime soon.

This is just a bear market rally like the last five we have seen since the fall.

While it is true the Fed is inflating like crazy, they can't control where the liquidity goes. It is now flowing into commodities like energy and food. This is not good for the consumer. In order for a bubble to work, it must do two things. 1. It must provide jobs. 2. It must be beneficial to the consumer. This commodity bubble does neither. And wait and see what happens to the market if your buddy Obama gets elected and raises capital gains taxes. OOPH!

Good luck with overvalued Apple. With the consumer stretched to the breaking point, those 3k notebooks and $500 cell phones will really be flying off the shelves!

sandman said...

Keith,

Please, keep this thread alive. it is an important one.

A few comments:

You say you turned into a "bull". However, I'm not sure that is exactly what you mean. In my mind a "bull" is someone who believes the entire market will go up - not just stock XYZ.

It seems you are recommending cherry picking certain stocks. Please, confirm. If so, I'm not sure you'd be a "bull", but perhaps bullish on certain stocks.

Also, we've all read Mainias and Crash Proof. In the latter book, I'm not sure Schiff would agree with your sentiment - he'd be saying go international.

Overall, I think the market will crash. Why? The average recession has the market going down ~30%. We only hit ~16%. I think we have a "W" at least - no pun intended.

None the less, there may be stocks that do well.

For all HPers, I'm trying to reconcile inflation vs. deflation. Right now we see both. However, it is EXTREMELY important to get this right to preserve wealth from what the FBs did to the economy.

Any thoughts on that (open to all for comment) - not just today but in the next 12-24 months.

BTW... I closed all my shorts in March for 100% ROI in 6 months. I re-opened short positions (Long Puts) in the past month - mainly consumer goods and builders (as they ran up). I think it may be 2-3 quarters before the tumble - but I believe they will indeed tumble badly - in fact they may go broke before the "irrational elements" realize it.

The rest of my money is in cash. I'm working on spreading that out for the right mix of a hedge against both inflation and deflation.

Again, please keep thi thread alive.

Chris said...

Hmmm..

I don't really have any money to f-around picking individual stocks but I have been doing really well in my 401k.

I made 10% last month.



-Drey Premium Natural Resources

-Ivy Global Natural Resources
________________________

I took advantage of the huge run up in Oil, but I think its coming to an end, I already moved some out into cash, but memorial day I am moving the rest out into cash as well untill I figure out my next play.




Oppenheimer Gold And precious metals
_____________________

I am going to keep my money in here as long as Bernanke keeps cutting rates.


The rest of the funds I am in are basically foreign stocks/ China, Latin America, Euro-Pacific type things as a play against the weaker dollar.

I think I am going to move the chinese money and the cash into utilities after the olympics is done.

Lisa said...

Just curious, while homeowners(debtors) are in trouble, renters are jumping into stock market ?? Since they dont see housing going anywhere for a while...

State of housing market:
http://calculatedrisk.blogspot.com/2008/05/home-builders-pessimistic-pricing.html

Edgar Alpo said...

GE sells appliance unit, T. Boone to buy 667 wind turbines from them. I think they flushed the mortgage unit too. Nukes could be next. Time to act?

Anonymous said...

Been in the realestate and stcok market in the last 35 years. Did way much better in stocks without the hassle. (100% per year for 5 years got me to retirement) Never will be landlord again.

Re the plug in cars. No way for Utilities. They take forever to build a plant under EPA. Plus most houses don't have sufficient
Amps into the house to charge a car. Check out the kilowatts a gas engine generates. Anyone who thinks there is enough infrastructure to support an electric car fleet is naive.

Lost Cause said...

Yup. Nasdaq over 5000 real soon now, and then housing is set to exceed 2007 pricing right after that.

Anonymous said...

....this is a bear market rally....

1. It will last longer than you think, so likely multiple months

2. The public is selling stock and buying money market funds, historically they are incorrect

3. Stocks are going up on bad news, which is a very bullish sign

4. This is not a game for the timid, pros spend 18hrs a day working on this, thus the 20% hedge fund returns

Anonymous said...

Dont worry about light volume.

Light volume on this bounce means selling is exhausted, thus markets bounce. Volume normally picks up later on, which could be months from now.

Stay bullish in short term.

And I might add that I've been a bear on equities for a few years and this website is fantastic, so by no means am I some bull fanatic

Anonymous said...

There is no new wealth being created.

Any gains in the stock market will be completely offset by losses in the dollar.

Since Bernake has started cutting rates, the dollar is worth 10% less, but nominally the stock market is at the same level it was at the start of the year.

That means money in the stock market lost 10% of its purchasing power in the past 6 months!

I'm betting on the dollar weakening further. That means foreign currencies, gold, oil and commodities should continue to outperform any pathetic gains in the stock market.

In the meantime, I am staying far, far away from any stocks (outside of energy and precious metal stocks) for the time being.

Jymkata

keith said...

Remember folks, to be crystal clear, I AM NOT AN EXPERT ON STOCKS. PERIOD.

I'm just a person like you doing his own research, and trying to protect his wealth against the ravages of Bernanke's inflation.

If you want stock trading advice, look to the experts.

Oh, wait, that's usually a good way to get slaughtered.

Bottom line - you're on your own. You are 100% on your own.

Read tons of different sites if you can, and opinions of tons of different "experts". Look at their track records, listen to their arguments, read balance sheets, read cash flow statements, do your homework, and take your best shots.

The general HP community has given some great advice though on stocks for the past couple of years. If you listened to many of the posters here, you could have made a fortune. Seriously, a fortune. Think of all the companies we predicted that would get slaughtered, that then went out and got slaughtered. Think of what happened to Gold and commodities, all of which was predicted here. Think of the money you could have made shorting the dollar.

Now housing, that's something I know a thing or two about. And we're a long, long, long way from bottom there. I wish you could short houses. Or realtors.

Anonymous said...

3. Stocks are going up on bad news, which is a very bullish sign<<<

yes it is true. funny how that works isnt' it? could it be manipulation? the President's Working Group on Financial Markets has been working overtime to paint a pretty picture the last few months. especially after they almost lost control with the loss of bear stearns, or so it would seem. anyway, i think they are manipulating the markets in a big way through their partners in crime such as goldman sachs, etc.......i think they use the investment banks to invest according the way they want things to do and the suckers get pumped up via the boob toob channel cnbc, the liars on tv and this is what has been going on. if you notice, every morning, at about the same time someone hits gold and silver hard. one of these days real soon those shorts are going to be crushed and it will be a fun thing to watch... i think one has to really do his or her homework messing around in this market...

Anonymous said...

mish shedlock over at
http://tinyurl.com/d8q6j

has a good article today on shorting treasuries. its a risky play but it might work....they think there is tons of money to be made there...

Anonymous said...

Anonymous Anonymous said...

There is no new wealth being created.

Any gains in the stock market will be completely offset by losses in the dollar.

Since Bernake has started cutting rates, the dollar is worth 10% less, but nominally the stock market is at the same level it was at the start of the year.

That means money in the stock market lost 10% of its purchasing power in the past 6 months!

I'm betting on the dollar weakening further. That means foreign currencies, gold, oil and commodities should continue to outperform any pathetic gains in the stock market.

In the meantime, I am staying far, far away from any stocks (outside of energy and precious metal stocks) for the time being.

Jymkata

May 19, 2008 2:35 AM<<<

i agree. i have seen graphs on real returns on stocks, and it isn't pretty. most of the gains are just in inflated dollars....

keith said...

Few more comments and thoughts:

* If you're not buying stocks, how are you protecting yourself from the ravages of inflation and the falling dollar? Sure isn't with 2% savings accounts.

* I generally don't like indexes, especially the Dow with just 30 stocks.

* Shorting t-bills is a good idea in my book. Interest rates are going to have to go up and go up dramatically

* HP'ers in general are a pretty wise and informed group. Listen to ideas here, then do your own research. Long and short.

* What are your thoughts on gold and silver? I'm out myself, seeing better opportunities for higher returns elsewhere at the moment.

* No matter what you do, remember to keep a stockpile of cash or cash equivalents in case it all goes to hell or new buying opportunities arise.

* The british pound has to be smacked soon as the british housing bubble implodes. The euro though I think will stay relatively strong.

* I like Russia. Anyone join me there?

Anonymous said...

Good look at s&p pe ratios

http://seekingalpha.com/article/77304-s-p-500-historical-trailing-12-month-p-e-ratio

keith said...

http://tinyurl.com/4oazzu

look at this ugly chart of starbucks and whole foods - blood in the coffee and blood in aisle 2 you could say.

some see two companies going to zero. I see two companies on my watch list (don't own 'em yet)

Anonymous said...

Jumping into the market six months after recession is a myth. That's what we're seeing now. It takes longer than that for the market to come back. Wait for the crappy earnings to come about next quarter. Yes, I've been itching to jump back in, but I trust my gut and previous experience. In the last recession, it took more than a year for the market to react.

Anonymous said...

If you're looking for short-term trades, you're on your own. I have no idea what stocks will do tomorrow, next month or next quarter.

Yeah, but what good does it do if the market will nosedive again after crappy earnings. Bernanke can't create earnings.

Anonymous said...

March lows will not be retested

Anonymous said...

http://seekingalpha.com/article/77543-what-s-behind-the-market-s-rise

Right now, however, while the shorts are covering madly and all the hedge funds whose long-term horizon is tomorrow jack up the stocks, we have a market that cannot stay down.

It should be noted that over the past two years, we have experienced tremendous credit problems that prominent economists have described as the worst since the Great Depression, nearly $300 billion in financial write-offs, a collapse in profits, rising unemployment, a collapse in the housing market, a corporate community that has been leveraging up its balance sheets to buy back stocks, an implosion of the private equity market, the disappearance of the CDO market, a consumer tapped out with records amount of debt, rising inflation, the collapse of a venerable Wall Street firm, and stocks are up. The S&P 500 was at 1280 two years ago. Today it sits at 1420, an increase of 11%.

Nor are stocks cheap, as I will demonstrate in a few days. They are not overly expensive either, but Wall Street is spinning valuation in the best light when, in fact, valuation is not particularly compelling.

As Jim Cramer stated: The fix is in. The Federal Reserve has been flooding liquidity into the system for some time, and the market is rising on that liquidity, and not, in my opinion, on fundamentals.

But for now, the path of least resistance is higher.

Anonymous said...

Can't you see that the whole strategy from the FED is to bring the crash slowly, little by little? We haven't got to the bottom yet. The consumer is dead, there's no way to create earnings, and exports are weak. There are many ways to fake good earnings but most of them involve selling assets or tricking inventory. They're all dead: automakers, retailers, airlines, transportation, financials, real estate, emerging, materials, etc. The only hot thing is energy only because it's the last year for the two oil men in office, so they're going for the kill. By November, energy will start dropping, too.

Anonymous said...

I'm staying in cash + commodities + energy + international utilities until October, then I'll move into cash only. The neocons will let this baby blow on Obama's face + Democrat majority in Senate and Congress. Energy stocks will nosedive, though.

Anonymous said...

GE (p/e of 7 with a 3.8% dividend, recent trouble but solid company and good entry for a long term play) the IF etf (p/e of 12.7 in a stable market you should look at).

Makes money with military industrial complex, jet turbines, bot are dead or about to die after the neocons live. Also, it's selling assets to fake earnings (i.e., selling appliances division). GE is dead, especially the financial side of it.

Anonymous said...

Europe hasn't even gone completely into the toilet yet. Spain and Italy are just getting the feet wet; wait for Germany, France, and Britain. It's still a bear market, IMHO. Lots of faking balance sheets out there to survive another quarter. Like I said last year, it will be another interesting xmas. Plus, the unemployment rate is just getting warm.

Anonymous said...

* If you're not buying stocks, how are you protecting yourself from the ravages of inflation and the falling dollar? Sure isn't with 2% savings accounts.

Mix of TIPS, Brazilian bonds, commodities, international utilities with stable currency, and CDs. Until October only!

Anonymous said...

Here is a bottom. A tech company I use to trade was over $400 a share. When nasdaq bottomed after the .com pop, the stock was worth $8 a share. People were still scared shitless to buy it too @8 -- if they had money at that point.

Its funny. I read another thread on the blog a few days ago: what part of the cycle we are in? Fear, panic, etc.

Just a couple days later, in an attention deficit moment, its BUY STOCKS!

DAMN, WHERE IS CRAMER!

Anonymous said...

Anonymous Anonymous said...

Can't you see that the whole strategy from the FED is to bring the crash slowly, little by little? We haven't got to the bottom yet. The consumer is dead, there's no way to create earnings, and exports are weak. There are many ways to fake good earnings but most of them involve selling assets or tricking inventory. They're all dead: automakers, retailers, airlines, transportation, financials, real estate, emerging, materials, etc. The only hot thing is energy only because it's the last year for the two oil men in office, so they're going for the kill. By November, energy will start dropping, too.

May 19, 2008 4:28 AM<<<

goldman sachs has been running around talking about $200/barrel oil. frankly i think they are talking their book and they are in this big time to try and make some cash to offset their losses on type 3 assets, which of course no one talks about. goldman sachs, if the truth was known are in deep doo doo just like all of them. they have at least 85B dollars in type 3 assets off book investments...yeh sure talking heads on cnbc, yeh sure cramer, goldman sachs are sure smart aren't they?

keith said...

Anon said:

"Its funny. I read another thread on the blog a few days ago: what part of the cycle we are in? Fear, panic, etc.

Just a couple days later, in an attention deficit moment, its BUY STOCKS!"

I say (again and again) - HOUSES ARE NOT STOCKS.

Housing is tanking and will now tank even worse (it's called supply and demand). Stocks, commodities, artwork, etc - repeat to yourself - THEY ARE NOT HOUSES. Each investment class needs to be evaluated independently.

Now Countrywide stock - that's a house.

keith said...

Oh, one more point for discussion.

You have a wall of money being created because of $120/bbl oil. Trillions and trillions in Russia, Saudi Arabia, etc looking for a home. Where do you think that money is going to go?

Serious question.

Anonymous said...

I like the dollar and don't see any reason to move into stocks but if I had to I'd look for something with over 5% dividend and under 10 P/E like AXA insurance.

Rom said...

The (non-housing) lenders I've talked to are pretty happy. Sure their business is down but the spreads that they are able to get now are coming close to making up for it. Some of their stocks are so beat up that they're selling at five-year lows. Maybe the losses are already priced in?

Anonymous said...

berkshire hathaway (brk.b)

Anonymous said...

liquidity = inflation

credit contraction = DEFLATION

Excuse me, where is the cash going to come from to prop up this stupid stock market?

Bargains? WHAT BARGAINS? A massive correction has not even occurred yet!!

Paul E. Math said...

I can respect this call, Keith but I can't agree. At least, I can't agree to play along with what the Fed is trying to do.

I don't regret not buying a house or condo in Phoenix in 2004.

I do not wish for money I have not earned.

You speak of moral decay in the Western world. Stock market speculation is exactly that.

If you're a long-term investor and you see good businesses with good value propositions at good prices then that is a different story. I don't see many.

Anonymous said...

I agree with buy and hold. Worst case scenario, profits keep pace with inflation and you keep your purchasing power, the market has obviously priced in the US recession so anyone who thinks "The US consumer is tapped out" is like 3 months behind the curve because that is all priced in already.

Anonymous said...

Boy oh boy has the MSM done its job on you.

"America has lost its manufacturing base" - please. From the National Association of Manufacturers 2007 annual report:

"For more than a century, the United States has enjoyed global leadership
in manufacturing."

"America is the world’s largest manufacturer, and exports are an important part
of our manufacturing strength. In fact, one in every five American factory jobs
depends on exports."

As far as stocks, I like the chart that goes back to 1990. The one that goes back to 1950 shows the action from last fall and winter as a tiny blip, during which I kept buying. Like Noriel Roubini, I am 100% in stocks and always have been, because it's the long-term winner.

DizzyDean said...

I have one:
Alpha Natural Resources, P/E 96.38
In November it was trading @ 25, today it is trading over 70. In fact the price has doubled since February. It is the P/E, it always is.

LauraVella said...

Buying stocks now for a small 15% - 20% gain isnt my idea of making money.

The market will be very scary come October - watch gains evaporate.

Why pay 15% capital gains and hold stocks less than a year; leaves zero profit.

Whats the point??

Anonymous said...

How many people use STOP LOSSES?

Good point of conversation. How are small investors covering their back-sides?

Personal experience is stop losses are targets. You go to bed thinking things are great, wake up get a cup of coffee, turn on the computer and find your stop loss triggered at the open but now the stock is back up. The price makers swoop down, drink your milkshake, then run things back up.

If you cannot trade pre-open, you can get slaughtered. The big guys cash out before you even have an opportunity.

Good Time Charlie

theloknesmonster said...

Last summer when the Dow went over 14000 I was going to sell and sit on my cash. I didn't.

When the market pulled back in August I was regretting not selling.

When the Dow was back over 14000 in October I was going to sell again and sit on my cash. I didn't.

When the market pulled back in the following months I again regretted not selling.

I finally sold 1/2 my positions when the Dow hit 13000 late last month.

If the Dow gets to the point where I would have as much cash as I would have had selling last summer I will dump the rest and sit, because I think the Dow is still heading under 10000 within a year.

I am probably out of luck though because I doubt the Dow gets to 14000 again anytime soon.

My prediction is that we will see the typical hilly but sideways ride that bear markets usually have, for the remainder of this year and into early 2009.

Then...look out below...

sandman said...

2 thoughts

1. Agree with the comment:

" Oh, one more point for discussion.

You have a wall of money being created because of $120/bbl oil. Trillions and trillions in Russia, Saudi Arabia, etc looking for a home. Where do you think that money is going to go?

Serious question."

Not only that, but where is all the TAF and FED liquidity going.

However... could it be commodities? You can almost hear the MSM justification - "the population is growing and needs more food"... "china needs to rebuild and needs steel"

What if it is commodities and not stocks?

Note in the 70's during rampant inflation the market traded flat while commodities rose.

I am not in commodities at the moment - but am thinking about the benign ones i.e. sugar, coffee, steel, etc. and not rice or wheat.

2. So why is everybody calling October for the show to drop?

Anonymous said...

How's that rally going for you? NAS = -0.53% today and overall marketing continuing to trade sideways and still expensive, always waiting for the opportunity to fleece the sheep who naively jumps in. Keep on buying that, by Oct 08, you'll be wiped-out.

Next shoe to drop: Commercial Real Estate.

Anonymous said...

The American housing ponzi scheme and Chinese companies/citizens speculating blindly with its stock market were the main reasons China and some emerging markets were growing so fast.

Since the housing ponzi scheme ended, including in Europe, don't expect much growth from China in the future. The commodity fiesta is feeding on itself because Bernake's banker pals are using his freshly printed money to trade rotten debt for speculative investments on energy and overall commodities.

In other words, after creating the housing ponzi scheme, the bankers are now using the taxpayer funded bailout to speculate on commodities, thus making your food and gas prices to skyrocket.

Meanwhile, the Democrat majority in Congress and Senate have as priority more bailouts to crook bankers.

Anonymous said...

I'm going to buy stock because you guys think it's a great idea... the 10-15% negative return I would have gotten on "gold to da moon" if I had listened to you clowns earlier this year would be very impressive!

I think I'll stick to buying foreclosures at 50-75% off their high sales, putting a few thousand into fixing them and selling them for a nice profit. After all, I'm using the bank's money and if I fail at it, the rest of you investing geniuses will just bail me out. Cash never was king, it's always been credit and how you use it.

Anonymous said...

Lauravella said

Buying stocks now for a small 15% - 20% gain isnt my idea of making money.

The market will be very scary come October - watch gains evaporate.

Why pay 15% capital gains and hold stocks less than a year; leaves zero profit.

Whats the point??

___________________________________

You only pay taxes on the gain, not the gross sale.

if you buy a stock for $100/share and sell it for $115/share (that's a 15% gain), you will only owe taxes on the $15 gain.

Long Term capital gains rate is 15%, so you would owe $2.25 on your $15 gain.

Jymkata

Professor said...

With the major indices overbought technically and now at their 200 DMAs and at the uptrend line from '02-'03 and bear market resistance, Keith proclaims his bullishness "now"? Keith, my friend! NO! This is uncanny! This is precisely the area where a bear market rally would be expected to top and trap latecomer bulls!!!

Keith, look at the P/C and VIX! Bullish complacency is rampant!

SELL!!!

Professor said...

In addition to my earlier post, consider what the Fed is doing: swapping Treasuries for bank junk so that banks can report the appearance of higher capital ratios, which in turn has allowed them to float more debt and stock to raise cash, all the while diluting shareholder value still further.

However, the Treasuries have to be paid back to the Fed, which is still an open question as to whether they will or the Fed just continues to roll the collateral loans indefinitely.

Bubble Ben Shalom and his banker pals are loathed to print money, i.e., expand the monetary base as the Fed did in the 1930s-40s and Japan did after '95-'96, for fear of being perceived as on the path to 0% Fed funds or the "zero bound" or "The Tyranny of Zero".

Such a situation would imply that the Fed will eventually have to jam the monetary base at 12-13% to 17-18% a year for 5-7 years (as the Fed did in the 1930s-40s and the BOJ from '96 to '03), causing the money multiplier and money velocity to plunge with soaring defaults and write-offs.

The banks are swapping junk for Fed assets because they banks are insolvent. I estimate that the off-balance-sheet losses are approaching $1T, whereas the markable losses will approach a similar amount as credit cards, student loans, home-equity loans, small business loans, commercial real estate loans, and collateralized real estate loans are factored in.

The consensus is that "the worst is behind us"; perhaps for the worst of the subprime, but the aforementioned segments of the credit market are only now beginning to manifest, not to mention insurance companies being on the hook for hundreds of billions of dollars of commercial real estate which has only begun to contract.

Further, the stock market exists as a "wealth transfer" vehicle to the top 1-5% who already own most of the financial wealth.

Stocks are not "wealth creating" vehicles except for (1) senior corporate managers who can set the strike price of restricted options as low as needed to make multiple millions from shareholder equity; and (2) for mutual fund and pension fund parasite "mismanagers" who run interference for a a hefty fee for corporate CEOs to plunder shareholder equity.

The stock market capitalization is still over 100% of GDP (avg. of 54% historically), albeit down from 200% in '00; as such, the stock market is the economy and vice versa.

In effect, the economy is hostage to the stock market, which is dominated in terms of market cap by the top 100 US firms, which in turn are disproportionately represented by the top 25-30 firms which account for 50-60% of total market cap. There has never been such concentration of economic and political power in all of human history, not even Babylon, Persia, Rome, Mongols, Spain, or the British Empire; not even close.

The stock market is a colossal scam, i.e., confidence game, run by some of the most rapacious criminal minds the world has ever known.

Putting one's capital/savings with this criminal syndicate known as Wall Street is naive at best and suicidal in the worst case.

Run away from stocks as fast as you can!!!

SELL WITH BOTH HANDS!!!

Anonymous said...

Come on Keith

Stocks are a BUY BUY BUY!!!!

WTF

You have got to be kidding me, I know your rational but the market is irrational.

I am out until after Oct., I think it is way too risky although I see where you are going with this.

Silver and Gold are my play until further notice. Wealth Preservation
ranks first when heavy risk is at hand!!!!!



ICEMAN

LauraVella said...
This comment has been removed by the author.
LauraVella said...

Jymkata said:"You only pay taxes on the gain, not the gross sale".

Yes, thanks for the info.

Isnt the tax rate higher if one holds a stock under one year? not including the 15% capital gain?

I think, it's something like 21% to27%?

Thats a huge amount to pay if the gains are not substancial.

Anonymous said...

"The general HP community has given some great advice though on stocks for the past couple of years. If you listened to many of the posters here, you could have made a fortune. Seriously, a fortune. Think of all the companies we predicted that would get slaughtered, that then went out and got slaughtered."

If you throw enough crap at a wall, some will eventually stick...it's pretty easy to see there have been plenty of missed calls as well.

To those of you who stay out of the market because it's rigged, why? Every market is rigged, so why are you in gold, oil, wheat, or whatever? If you pay attention to the "experts", you know they are selling when they say buy and vice versa. I've made a pile of money doing exactly what the "experts" DO as opposed to what they SAY. You have to understand how they do their job, though.

And what are the "experts" saying now? Buy gold. Buy international stocks. Buy the Euro. Those will be the next to fall.

Anonymous said...

Sounds like good insight and advice Kieth. But on the 'internets'?
Whatever, you're still the man.

Anonymous said...

lauravella:
"Isnt the tax rate higher if one holds a stock under one year? not including the 15% capital gain?

I think, it's something like 21% to27%?

Thats a huge amount to pay if the gains are not substancial."

Why are you even posting on this topic if you know nothing about it? You've already shown that you've been operating under false assumptions until you got your ass straightened out here on this blog.

The term is "short-term capital gains". The tax rate is the regular tax rate, based on your income.

Speaking of taxes, you know what's a huge amount to pay? The 50% or more you actually give to the government, hidden away in the price of the goods you buy, sales taxes, property taxes, etc. that disappears into a black hole.

Even if you were in the top tax bracket, 35% of $15 leaves $10.75 profit. A 10.75% gain! It's why brokerages are able to charge commission - even with those subtracted, along with taxes, the gains are superior to anything else over the long haul.

keith said...

"The Internets" is an inside joke we bloggers use in mock stupidity, it's what bush called the internet once

I think he said "the google" too

Anonymous said...

I know there are tons of media people saying things like, "Now is a great time to buy a house," but I have this inner hunch, a vibe, if you will, that housing prices will drop to the point that you'll be able to buy whatever kind of home you want for a song.

So I'm waiting. And watching. Discounts of 30 and 50% are not good enough. I'm thinking rock bottom, 20,000 for an executive McMansion. Not that I'd want to get one, of course, because there are definite upkeep and maintenance issues on a large property.

Yeah, you probably think I'm crazy, and if you own a house you probably hate my guts, but nobody knows where this wild ride is heading..