Wild Week

In a Bear Market “Nobody get out alive.”

So if you have followed my advice since March you are in cash and have a nice big watermelon smile on your face. If not, and you are still in the market then you are either looking for a second job to make up for the losses and/or are on welfare (my condolences).

The markets pretty much had their worst week in history, as the chart of the Dow below indicates. Markets are now where they were 10 years ago. So that means if you are a buy and hold investor you officially have made 0% on your money and are in the red if you count in inflation.

The good news is there is a gift horse buying opportunity coming in the next couple weeks. Follow my picks and you will be making triple digit gains (that’s over 100% for those of you who attended public schools). How can you make 100% in the stock market? Buying leverage and on margin – only recommended after the market is at 10 year lows, as it is now. Follow my advice and you will soon be taking up new hobbies like yachting, squash, and aggressive spending. You may even have enough cash to replace your above ground pool with a real one or buy your hideous teenage daughter those braces she needs so she can finally get a date to the prom. As soon as this market is ripe for the picking I’ll post those picks and then you can watch those profits flow.

Market Down 10% This Week

That would be a big number for a year’s worth of losses, but it’s gigantic for one week. The market got its wish with the $700 billion dollar government rescue package but that was not even enough to stop the endless selling pressure.

The real kicker in this market is housing prices which continue to fall on a monthly basis. In addition to lower home prices the unemployment rates are rising along with credit card and mortgage delinquencies. I think both will continue to get worse and companies start laying off large numbers of employees to help reduce overhead cost.

The market will continue to stay weak and we still have not seen the ultimate lows in 2008. The good news is I expect we will put in the low for the year in the next 2-6 weeks and that will be followed by a powerful rally heading into 2009.

Uncle Sucker

A bail out package of $700 Billion will cost the average American family over $10,000.

Is this fair? Consider the pay package of the new Washington Mutual CEO, who has been on the job for 3 weeks.

“NEW YORK (CNNMoney.com) -- Washington Mutual Chief Executive Alan Fishman could walk away with more than $18 million in salary, bonuses and severance after less than three weeks on the job, according to the terms of his employment agreement.”

Wow, the stock is worthless. WAMU is bankrupt and stockholders all got burned. An $18 million dollar payday for 3 weeks on the job? Is it any wonder that polls overwhelmingly show the average taxpayer does not support the current wall street bailout package? Washington's bailout plan is apparently in trouble. With lawmakers saying their e-mails and phone calls from constituents back home are running as much as 100 to 1 against the bailout, it may be difficult for them to vote for it and then go home to run for re-election. But something has to be done before they break for the election recess this weekend.

One interesting note on the economy is new home prices plunged 11.8%, not in a year, but from July's level. That is going to lead to more defaults and foreclosures, which were already soaring.

The only question is which banks will be going out next? Wachovia is the next big bank rumored to be teetering on the edge.

What a Week!

The stock market was down 8% from Monday to Wednesday and up 8% from Thursday to Friday to finish the week flat.

This is a period in the financial markets you will be telling your grandchildren about, the closest the U.S. financial system has come to meltdown since 1931, and the first time in its history the U.S.A. moved so far and abruptly from democracy and a free market system toward socialism, government control of markets, and nationalization of its financial institutions.

My current recommendation is to take 50% of your portfolio and burry it in the backyard and take the other 50% and hide it under a mattress in the upstairs bedroom.

Waiting for Godot

Waiting for Godot is a play by Samuel Beckett, in which two characters wait for someone named Godot, who never arrives.

Waiting for a market to bottom feel a lot like waiting for Godot. You are always wondering when he will show up. I think we are closer to the end of the play then the beginning and patience is our friend. The market will bottom and there will be a great buying opportunity but we must wait for a couple of things to take place. First and foremost the market must make a new bottom. This mean the S&P must break down below 1,200. Second, we must see a reading of over 30 on the VIX (Fear) Index. As the chart above shows we are currently at 25 so 5 more points up and we have a green light to be a buyer.

Sit and Do Nothing

That’s my current recommendation – better to be in cash earning 2-3% then watching the market go down day after day. This market sure looks like it wants to continue falling. Looking at the below chart and see the pattern of lower highs and lower lows. I think the current market will bottom sometime in October – November and then it will be time to put your cash to work – but for now it’s all about patience.

Here Comes September

September has been, on average, the worst performing month for the stock market with an average return of negative 1.13 percent since the Dow inception in 1896. This market sure feels like it is due for a major correction of somewhere between 10%-20% as we head into the last part of the year. I think the market will bottom for the year around the October – November time frame.

Georgia's Integrity Bank is Closed by State Regulators

Integrity's closure is the 10th bank failure so far this year. The bank had $1.1 billion in total assets and $974 million in total deposits as of June 30, the FDIC said. The bank had $1.1 billion in total assets and $974.0 million in total deposits.