Post: #126

• Convert to a USD cash position
• Buy USD denominated equities
• Trade into the DAX or German Bonds. A lot of institutional money is doing this because they believe that, in the event of a Euro breakup, they will be paid out in Marks.
• Look at metals. The bearish trend relative to USD is flipped for the Euro, and metals are bullish vs. EUD.
  

Post: #127

If you're willing to look at exchange-traded finds and not just stocks, try UUP - it's a fund that tracks the value of the USD against a basket of major currencies.

Post: #128

Bump for relevance.

We are now on Federal Reserve Watch - 72 hours away from the decision by the FOMC on whether to raise the Federal Funds Rate off the 0.00-0.25% bound, and thereby end eight years of NIRP.

Asian stock markets are already significantly down - this after a week of selloffs across all global financial markets. It's likely that the next few days will see some significant volatility. Expect to see lots of red and financial people panicking.

What do you guys think will happen? Will a last-minute market tantrum stop Yellen?

Post: #129

Pretty much nothing will stop it. The last job report gave them the green light and they're confident that inflation will head to 2%. Expect liftoff.

Post: #130

Rate hikes are probably priced in - either for this week or happening within the next quarter or so. It's even possible a slight rate hike could be viewed positively by the markets.

I think the volatility we're seeing now is a continuation of the big correction that started earlier this year. We are way off the lows of that. The market seems to be working out the correction in a sideways pattern now. It went up strong for a bit recently, then hit old highs and now is going down. It is kind of grinding out a sideways pattern.

It seems to be forming the "handle" part of a cup and handle for those who follow technical analysis. All in all, it seems to be forming, so far, a healthy and expected looking "left side". I look for this sideways ( up to old highs and then correcting a bit ) to go on for sometime. It's very similar to the corrections of 1998, 2010 and 2011 if you're a chartist and care to check those out.

After the grinding sideways pattern, I look for and am hopeful for a breakout to the upside by the markets. Time will, of course, tell.

Post: #131

I'm in the bear camp, so take this speculation with a grain of salt. I don't think the markets can handle any sizable rate hike. Sovereign and corporate debt is too high, and a rise in interest rates will make the interest on debt repayments push deficits exponentially higher.

Corporate debt has expanded dramatically in the last 7 years. Many bulls will say everything is fine, because the price to earnings ratio isn't in bubble territory yet. But if you look at where the debt has done, it paints another story. A majority has gone into stock buybacks to push down their PE ratios, not into productive investment like CAPEX. It's all papering over the potemkin village. When interest rates rise and risk is priced in, the house of cards will inevitably fall.

Asset values have been predicated on a secular decline in debt costs. They roll over existing debt, take on more, and the repayment cost stays the same. We're now at the zero bound and debt is free. This is the final act. Debts will have to be repaid eventually. I expect to see a rise in insolvencies and restructurings in the near future.



We're already seeing deflation in commodities. Oil has been low for close to a year, and the Bakken dry index point to a vaccuum of demand. This holiday season's retail figures have been anemic. This is often the first sign of recession. A rise in mandatory expenses like Obamacare have helped to hide the decline in real economic output.

There has been no material recovery since the last recession. The jobs that we've added are mostly part-time retail and food sector jobs. Millions of prime working age (25-54 cohort) have left the labor force because they gave up looking for a job. Companies have been cutting jobs and cutting costs. Investment has piled mostly into rent-seeking asset accumulation, driving up the cost of rent and food but making the FIRE class rich. Wealth inequality has skyrocketed, and can only go on for so long. Eventually, the people whose jobs have been cut and rent has been raised won't be able to afford the discretionary spending the FIRE class depends on. We're in the 'busting out' phase of the economy.

The FED has prevented the free market from pricing in the real risk of debt. This has made investing child's play for the last 7 years. "Don't fight the FED". But they are backed into a corner now. Asset values are elevated, and their credibility is at stake. If there were a major correction that happened while the fed funds rate was at emergency levels, it would show the FED to be powerless and undermine the credibility of central banks worldwide. They said they would raise rates if their 'data dependent' approach reached the figures we're at today. I think their plan is to raise rates modestly, let the market correct, then lower them back to 0% and begin a new round of QE.

Another reason they're hand will be forced: pension and insurance funds. The solvency of these funds are predicated on a normal risk and yield structure. This allows for the capital gains to grow in time in order to payout retirees or claimants. The flattening of the yield curve has pushed these funds into massive deficits. Insurance companies can raise rates, but municipalities can't without political backlash. We've already seen rumblings of this in Stockton, Harrisburg, Detroit, and now Chicago. Expect to see more of this.

Something big is coming. I don't know about you, but I'm adding to my shorts.

Post: #132

Yeah people should understand that there is a distinction between how policy affects a bubble economy and a more sustainable one.

The US economy as it stands is a bubble economy wholly dependent on Fed largesse. Since Dec 2013, the Fed has slowed down its rate of stimulus, and since Oct 2014 it has been sitting on its hands basically. It's no coincidence that from those dates, many economic indicators are rolling over, flirting with recessionary levels. Global stock markets made their highs in May 2015, and the Nasdaq is the only major index in the world which has made a new high since.

A Fed that hikes rates in this environment is going to take the life that they gave to the bubble economy in 2009, but is exactly what the sustainable economy needs. The thing is the Fed, even though it probably doesn't want to, HAS to put a rate hike on the record for purely academic reasons. It has to prove that the bubble economy is in fact real and that it can stand on its own two feet without the Fed propping it up. The academics that run the Fed are working from a theory that states that they can mitigate recessions through monetary policy, then back out when the storm has passed. If they can never back out, the whole theory is rendered useless, as well as the 30+ year academic and professional careers of many of these people.

I personally think that they'll raise rates, for that reason, but even if they don't merely sitting on their hands won't be enough to prevent another severe recession. The only thing that will take the economy and global stock markets materially higher again is another bout of QE. Should that happen, it would be a stark admission that the economy can't stand on its own two feet, and cast a dour outlook over the fate of most of the G7 currencies.

Post: #133

^ Good post TG and all true. It seems the piper must be paid at some point, but I think it's further off.

As a great investor once said: "The markets can remain irrational longer than you can remain solvent."

Post: #134

I will tell you what is going to happen, taking into macroeconomic and political realities. With the Fed Funds hike coming, as well as an increase in the debt ceiling coming, which will result in an increase in public debt, you will essentially see a downturn in the Chinese market. The SSE [Shanghai Stock Exchange] will go down or crash. You want to look at sectors that are negatively correlated with the SSE to see where the market will go up or down.

Sectors that are in the long term going to go up: Energy [Oil, Coal, Natural Gas]

Going down: Healthcare, Toys/Video Games

Energy will go down a little further in the short term, but it will soon rise fast. Places like Blackstone Group are holding cash and not investing in oil yet for a reason, but soon oil will reach it's minimum. OPEC policies are going to change again, fracking technology betterment will result in rising stock. Chevron, Exxon, and Peabody Coal are great stocks to have.

Healthcare: Obamacare will collapse. More patients also means more payouts to be made by insurance companies. Short healthcare: CVS Healthcare, UnitedHealth, are good ones.

Games: Hasbro is one to short. Mattel, on the other hand, which has moved production from China to India, will be going up. EA games will go down.

I have an Index model that I have made that uses the Wilshire5000 as an interaction variable to the SSE and uses various macroeconomic betas [public debt, fed funds, etc] to make predictions on the closing numbers of the SSE. They are bad. Enjoy the low gas prices. Invest in commodities!

-I have actual numbers, equations, graphs, excel files, regressions that I have made...

Post: #135

So anyone recommend a good etf if I don't want to figure out shorting?

Someone was nice enough to recommend UltraShort S&P500 - SDS which I used on my Robinhood account. Just wondering if there were some other options.

Thanks.

Post: #136

I have no data only gut instinct. I have been investing on and off for 10 years.

These last couple months have felt strange. Just what seems like a lack of confidence in everything.

I think this market is sitting on a half inch of ice. It feels like any big tremors and it is go time.

I should have sold off in summer like I knew to, got cocky. When the correction hit my ratcheted stops got hit so I gained less than I should have.

I am on TEAM BEAR CAMP.

I bought $500 of Shell based on BIG IN TOKYO's recommendation for 8% dividend and oil bottoming out now for kicks. Feels like we were in a storm in the early Fall and we are about to go into a bigger one.

Post: #137

Today, I bought a few thousand dollars' worth of Vanguard Total International Stock ETF (VXUS).

It's a long term play. I realize the price may go down, probably a lot, within the next few months, but I believe it will be more expensive say 5-10 years from now. International indexes are much cheaper than US (in terms of P/E ratios) thanks to favorable exchange rates and overall decline in prices.

Post: #138

Great information, everybody. As somebody who has a decent layman's knowledge of the economy but is looking to have a much firmer grasp, how do you recommend going about this?

As for the decline in the financial markets: How do you protect yourself from this or even take advantage of it?

Post: #139

For a layman there is Shorting ETF's of the entire market so you don't need to pick individual stocks for the way down.

Otherwise you can have cash on the sidelines ready to buy in at the bottom. Also you may do some side stocks that have good dividends that otherwise may be hurt less by a crash, such as some oil stocks right now.

If you want to get more risky at the bottom you can buy 2x and 3x index ETFs right at the bottom to catch the way up once you feel certain the bottom has hit.

Again this advice is layman to layman (for people that don't have the will to follow individual sectors and stocks).

Post: #140

(12-14-2015 10:35 PM)Travesty Wrote:  If you want to get more risky at the bottom you can buy 2x and 3x index ETFs right at the bottom to catch the way up once you feel certain the bottom has hit.

Unless you are daytrading (holding your position for less than one trading session), experienced in same, and know what you're doing, stay away from inverse leveraged ETFs. They have the potential to go extremely bad for any trader - especially in markets like these where there exists more than a little in the way of market manipulation. Trust me, I've been burned by these before.

Post: #141

(12-14-2015 10:30 PM)Mr. Brightside Wrote:  Great information, everybody. As somebody who has a decent layman's knowledge of the economy but is looking to have a much firmer grasp, how do you recommend going about this?

As for the decline in the financial markets: How do you protect yourself from this or even take advantage of it?

Nobody can time the market consistently.

If you believe that the stock prices will go down a lot, you can keep your money in cash, use CD ladders and peer to peer lending, though there will be more defaulters among p2p borrowers if there is a recession/crisis.

I am keeping most of my money in diversified index funds, mostly s&p500 with some international and alternative asset exposure. Even if there is a recession, if I don't sell them, the stock market is likely to go up on the long run resulting in long term gain even if stocks are not bought at the lowest price points. Automatic dollar cost averaging works better than active trading, at least for me.

I never short the market and would advice against doing so unless you are an experienced trader.

Post: #142

For those looking to short without true "shorting" just google "inverse etf list".

I have 200 shares of SPXS. It's a Direxion SP500 3X Bear. meaning it's triple leveraged. Don't stay in this too long as the swings are crazy.

Post: #143

(12-14-2015 10:30 PM)Mr. Brightside Wrote:  Great information, everybody. As somebody who has a decent layman's knowledge of the economy but is looking to have a much firmer grasp, how do you recommend going about this?

As for the decline in the financial markets: How do you protect yourself from this or even take advantage of it?

Buy Gold

Post: #144

Fed Funds hike coming. Meeting is going to take place from today to tomorrow. Investors should definitely earn about what this means for you.

Post: #145

So what does this mean? Any opinions? I'll take a stab at it.

A rate hike means the cost of debt service will go up across the board. Asset prices that are heavily reliant on credit should drop, as a higher interest rate means the principal must be lower to produce the same payment amount. That should mean a drop in real estate values. Home building may be hit. The auto industry will be hit.

Stock market prices should correct, though modestly. Higher debt servicing costs mean companies must spend more of their cash flow for buy backs, which will make them less attractive. Highly leveraged companies with high PE ratios could be hit harder than others.

The carry trade will be affected. Cracks in HY bonds will start to form, and the modest yield difference won't make the added risk worth it. I think we're already seeing this.

I cashed in my stock portfolio for now. Growth has been anemic since QE4 ended, and PE ratios adjusted for stock buyback activity is close to bubble territory. Keeping cash on the sidelines for when prices are a better value. Also bought some QID (Short the Nasdaq) due to the Y2K level PEs of tech companies.

Post: #146

(12-15-2015 03:37 AM)The Beast1 Wrote:  For those looking to short without true "shorting" just google "inverse etf list".

I have 200 shares of SPXS. It's a Direxion SP500 3X Bear. meaning it's triple leveraged. Don't stay in this too long as the swings are crazy.

To be clear, these ETFs are risk the capital you put in. That is the way I have always understood it. I don't mind losing all I bet, I would hate to be asked for more, given these potentially crazy times coming, I just want to make sure my understanding is solid. Thanks.

Post: #147

Wouldn't a fed funds rate hike only affect NEW debt issuances though?

I didn't think federal debt was floating rate...it has a set coupon at issuance, and the yield only changes in the secondary market between traders setting the price between eachother. When they talk about the 30 yr rate changing....that is referring to the secondary market for the debt, the coupon (interest) the government pays would be the same as it was at issuance. what am I missing?

Post: #148

Curious does anyone have P2P lending experience here? Sounds shiny, don't know anyone personally with experience though.

Was the juice worth the squeeze as far as the research involved to lending the money?

How did it compared to just throwing it in a high dividend stock or a government bond?

Post: #149

(12-15-2015 04:10 PM)samsamsam Wrote:  

(12-15-2015 03:37 AM)The Beast1 Wrote:  For those looking to short without true "shorting" just google "inverse etf list".

I have 200 shares of SPXS. It's a Direxion SP500 3X Bear. meaning it's triple leveraged. Don't stay in this too long as the swings are crazy.

To be clear, these ETFs are risk the capital you put in. That is the way I have always understood it. I don't mind losing all I bet, I would hate to be asked for more, given these potentially crazy times coming, I just want to make sure my understanding is solid. Thanks.

That is how my investment advisor explained it to me. In other words, it doesn't have unlimited risk like a typical short. (This is not investment advice).

Post: #150

(12-15-2015 05:19 PM)thoughtgypsy Wrote:  

(12-15-2015 04:10 PM)samsamsam Wrote:  

(12-15-2015 03:37 AM)The Beast1 Wrote:  For those looking to short without true "shorting" just google "inverse etf list".

I have 200 shares of SPXS. It's a Direxion SP500 3X Bear. meaning it's triple leveraged. Don't stay in this too long as the swings are crazy.

To be clear, these ETFs are risk the capital you put in. That is the way I have always understood it. I don't mind losing all I bet, I would hate to be asked for more, given these potentially crazy times coming, I just want to make sure my understanding is solid. Thanks.

That is how my investment advisor explained it to me. In other words, it doesn't have unlimited risk like a typical short. (This is not investment advice).

This is correct, because you are long the ETF. Shorts have theoretically unlimited risk because you've sold something you borrowed. You eventually have to buy it back to return it, even if it costs a floppityjillion dollars to do so.