Time to dive back in…
Thoughts...
Great Depression I had three panic selling periods to initiate its fall – resulting in about a 55% failure – leading to a total failure return of 89% after 34 months. After the panics – which took 15 months – there were three 15% market declines that took about 4 months each to fully develop. Their slopes look even and similar to each other.
Great Depression II has had three panic selling periods so far to initiate its fall – resulting in about a 57% failure – leading to a total failure return of ??? after ??? months. We are somewhere in a bear market rally (assuming the pessimistic view) similar to the same period (17th through 18th month) as GD I.
So, what is the worst case???
We are all Special Enough to Live in Great Depression II:
Assuming we will be trading live chickens grown in our kitchens for burlap sacks intended to become fine fashion clothing we will see 3+ downturns of 15% that each require about 4 months to complete. At the end, some bubba that got hit in the head with a baseball by Mr. October during the 2007 season World Series will have his million dollar retirement nest egg reduced to about $100,000. He is currently slumbering along with an account valued at about $550,000. Wake up bubba, wake up. If you are a reading member of this blog (TSP Talk, not my silly corner) you are not bubba in REM sleep. And, wouldn’t we be kinda presumptuous to assume we live in a time as unique as the Great Depression and World War II (unless you have read ‘The Fourth Turning’)?
Anyway, the end result is that we can deal with 3 or 4 month downturns – even with the stupid IFT limitations. I don’t think I will watch my assets ‘gradually’ erode without letup over a span of four months. Unlike the 1930s I can make my move using the Internets!
We are Living Through a ’73 Era Crash:
Already got this one beat to the negative. It was much more graceful and flatter than either our special time or the Great Depression. It had two dumps with the big one taking seven months. The low point occurred 21 months after the start. After the low there were two corrections of about 10% that each took two months to complete. Those corrections were part of a rally to a flat line. The slumbering victim in his Sammy Sosa shirt would be at $520,000 at the depths of this crash, but if Jack Bauer didn’t wake and panic him he would have been ok in a few more months.
Regardless, I can handle corrections in a mini-bull market. As we know, Jimmy Carter helped create the flat line market that occurred after the recovery period. Hopefully, we are not in the 4th day of 444 days of national embarrassment (and sweater talk). If not, I want to be in the market before LeftTurd policies flat line my retirement growth, eh!
We are Living Through a ‘Gentle’ Tech Crash:
If so, invest invest invest. You cannot know if some Yo Ho Yo Ho Pirate of Tripoli will run his claptrap boat into an aircraft carrier and detonate a nuke. Even so, me thinks you can bail from the Bama market in time to pair your losses. Personally, I like the fact that many of the banks are chaffing at the bit and trying to bail out of the bailout. Don’t like Government Motors or the Chrysler situation – but Ford looks ok. Don’t like California – but, I think their role in the economy has been shrinking anyway.
So, how to play. I think I will reinitiate my old 3 Allocations plan again. The middle one will be 60% in C/S/I, the conservative 40% C/S/I, and the smiling boom plan 80% C/S/I. The next IFT will take me to the 80% holding. I don't want to get caught short on IFT Transactions; I can always bail, but I have only one more large forward trade capability. That gives me much of the gains, but keeps 20% in cash to reinvest if the Treasury or President 'day-crashes' the market by opening their yaks!:nuts:
