ContrarianJeff's Account Talk

[350zCommTech]

Two news items that could provide some much-needed rocket fuel for this market.

1) It looks like the uptick rule will be brought back, which would bring some confidence back to the markets and help prevent bear raids. The fact that it was removed after working effectively for 70 years is absolutely astounding.

http://www.bloomberg.com/apps/news?pid=20601109&sid=aQWwTSdLSybk&refer=home


2) A U.S. House Financial Services subcommittee plans a hearing on mark-to-market accounting rules, which have been blamed for forcing banks to report billions of dollars in write-downs, a source briefed on the matter told Reuters on Wednesday. This could be a HUGE boost for the financials.

http://www.reuters.com/article/managementIssues/idUSN0454048120090304

Both of these will provide 1-2 day rallies, maybe less. Then the selling continues. The removal of mark to market is a joke. Nobody has really been using mark to market. They still have billions more to write down. If they had been using mark to market, there wouldn't be a lack of confidence in the market. This is not the way to get the credit markets going again. Just my humble opinion.

Btw, how are we suppose to catch you if you don't stay in the G fund.

 

[Birchtree]

50% of the AIG $61 billion write down was due to mark to market accounting. History also has something to say here. According to Milton Friedman, mark to market accounting in the Great Depression caused the failure of many banks. Little known by economic historians is that in 1938 President Roosevelt's administration finally realized the mistake and suspended mark to market accounting. Then, from 1938 to 2007, the US had a relatively subdued business cycle and experienced no panics or depressions, even in the 1980s and 1990s when more than 3000 banks and S&Ls failed. In 2002 with Sarbanes-Oxley and in 2007 with FASB 157, mark to market accounting made its come back. Since then, the economy has had serious troubles. ibid. ftportfolios previously posted in my thread. The financial stocks will show gains of over 100% if mark to market is suspended for two years.

 

[Corepuncher]

Lifting the Mark to Market Rule - will be the single biggest boost PEROID

But won't that make it even HARDER to value a financial company? It's already clear as mud! :laugh:

 

[ContrarianJeff]

I really don't know what the suspension of mark to market accounting will do for financials. It seems to make sense if you can show that you're going to hold onto the asset for a while. Mark to market can create a vicious cycle if pressed. Birch, I didn't realize that half of AIG's recent write-down was mark to market. That's amazing.

It sounds like there is some legitimate debate about the economic effects of suspending mark to market, but I think the confidence boost and stability that it would provide for financials is not debatable. A massive amount of money on the sidelines would likely begin moving into equities.

Good discussion, guys. Thanks for your thoughts.

 

[ContrarianJeff]

I don't know about y'all, but I find market bottoms much easier to forecast than tops, and right now, many sentiment indicators are at levels that have consistently preceded intermediate term bottoms. Everybody, including me, has assumed that there would be another huge whoosh down before we began to move up. But isn't it just like the market--to do the unexpected and frustrate the most amount of people possible?

I'm guessing that there are a lot of folks who will sit out the next big rally (whenever that begins) because they don't want to chase prices higher and they will stick to their assumption that there will be another big leg down. Then they will wake up one day and see the Dow at 10,000 and realize that they missed a 3,000+ point move. One of the most important things I've learned about trading is that great traders listen to the market, and they are quick to acknowledge when they were wrong. Traders that lose a lot of money stick to their forecasts, and they like to tell the market what it should be doing and why. Another way of saying this--good traders know how to make a profit, great traders know how to book a loss.

I just have to remind myself that at market peaks, almost everybody is bullish. And at bottoms, there will always be many, many, many experts who will guarantee that we've got a lot further to fall.

 

[Corepuncher]

If today's rally was about China, then I think that is a bogus reason to rally. GE was down big today...if there is anyone who can benefit form a global growth story it is GE. Financials such as US Bank, Citibank, Wells Fargo down big again today. Bonds continue their drift down.

There is talk of suspending Mark to market, but something does not smell right. Anywhere near 741 and I'm out. I still envision a DOW in the 5000 range before years end.

 

[cbackous]

when it comes to mark to market accounting i can only think of one word:

ENRON

 

[ContrarianJeff]

Even though a huge percentage of TSP Talkers are already in G or F, as a contrarian, I find it interesting that most of the IFT's that have taken place over the past week have still been to the more conservative/less risky funds--G or F. On days when the market has been down, many people can't take the pain anymore and leave the C, S and I. And on a day like today, when the market is up big, many folks think that this is a one-day wonder and leave CSI and head for the safety of G and F. This is completely understandable, and everyone (including me) is susceptible to it. Nevertheless, it's further proof that markets have an uncanny ability to shake off even the most bullish investors before making significant moves upward.

This may or may not mark an intermediate term bottom--nobody knows. But the market loves to climb a wall of worry, and it's been a lifetime since there has been a wall of this magnitude.

 

[Steadygain]

Nevertheless, it's further proof that markets have an uncanny ability to shake off even the most bullish investors before making significant moves upward.

But the market loves to climb a wall of worry, and it's been a lifetime since there has been a wall of this magnitude.

Honestly Jeff - You sound a lot like Birchtree - and anyone that confident deserves the TOP SPOT.

I hope you lock in on a really good gain

 

[ContrarianJeff]

Honestly Jeff - You sound a lot like Birchtree - and anyone that confident deserves the TOP SPOT.

I hope you lock in on a really good gain

I sound like Birchtree, huh? I would normally ask if that's a good thing, but since I know how much you respect Birch, I'll take that as a major compliment. I tell you what--everything within me tells me to lock in a gain right now and follow your lead (and 350Z's and poolman's) to G or F. And if we had unlimited IFT's, I would do just that for at least a few days. I think I would also head to G if I was closer to retirement, but I just turned 40 last week (my family and church really got me on this b-day! :laugh, so I've got a lot of years in front of me.

I've decided to take a risk and leave it in the markets for a while. I'm hoping that this will turn into a decent 2 to 3 week rally. I'll tell you, though, I'll be running to G if we close below 695 or so. It's not difficult for me to admit I'm wrong because it happens all the time!

Thanks, Steady. I always enjoy reading your posts. And congratulations on your excellent calls and locking in those gains! You've consistently been near the top of the tracker for a long time (and I'm guessing that will continue).

 

[350zCommTech]

I sound like Birchtree, huh? I would normally ask if that's a good thing, but since I know how much you respect Birch, I'll take that as a major compliment.

Jeff,

I don't know what Steady is smoking today, but you are a true contrarian. A total opposite from Birchtree.

Looks like you're going to be back on top tonight. Congrats!

 

[ContrarianJeff]

Jeff,

I don't know what Steady is smoking today, but you are a true contrarian. A total opposite from Birchtree.

Looks like you're going to be back on top tonight. Congrats!

Thanks 350! And congrats to you on locking in some nice gains. If we go down at all (which is what it feels like to me), you'll be the top dog in a hurry.

 

[350zCommTech]

Thanks 350! And congrats to you on locking in some nice gains. If we go down at all (which is what it feels like to me), you'll be the top dog in a hurry.

Thanks Jeff,

Good luck to tomorrow.

 

[Steadygain]

I've decided to take a risk and leave it in the markets for a while. I'm hoping that this will turn into a decent 2 to 3 week rally.

We are doing fantastic - all of us - and I'd like to see a lot more come out from under the water and get above me.

Am now petty convinced this is 'undoubtedly a rally' that may extend even longer than 3 weeks - with 20% Gain.

BUT I DO BELIEVE WE WILL FALL TO A LOWER BOTTOM

For now I'm asking all the Mega Influences to share 'why we are in a rally - and why NOW is the TIME TO BE IN HIGH RISK'

Would you mind sharing your views on that??

Thanks,
Steady

 

[ContrarianJeff]

For now I'm asking all the Mega Influences to share 'why we are in a rally - and why NOW is the TIME TO BE IN HIGH RISK'

Would you mind sharing your views on that??

Thanks,
Steady

You bet! I look at many, many different things to give an idea of risk vs. reward. Everything from relatively esoteric things like TD DeMark setups and Elliott Wave theory, various overbought and oversold readings (and, more importantly, how the market reacts to those), and numerous contrarian and "intelligent money" indicators such as investment surveys (like AAII), Rydex fund flow and holdings, risks taken by small traders, insider buying, and history (how the market has reacted in similar circumstances). I even look at the TSP holdings and transfers on this site. I love learning and I enjoy reading blogs and sites like TSP Talk. I use technical analysis, especially to find short term trades, but I'm not too good at it. I don't look at the economy or politics at all to make trading decisions (I only keep track of that stuff out of personal interest and to see how the market reacts to it).

I've never seen any one theory that is the "be all, end all," but I do find that a contrarian mindset (that is, going against the crowd) is the most helpful principle at finding good entry points on an intermediate term basis, especially at low points in the market. For me, finding a bottom (a time when I need to get in the markets) is much easier than finding a good exit point. Bottoms are usually specific points while tops are "processes." Tops--even intermediate term tops--are tough for me to call. For example, I missed almost all of the rally last December because I got out way too early.

Right now, most of the indicators that I look at are showing signs of an intermediate term low. AAII surveys and other sentiment surveys are the most bearish in history, risk-taking by small traders is at record lows, insiders are buying in amounts that are usually associated with market bottoms, many (but not all) Elliott Wave theorists that I trust say that we are in or are about to be in a decent leg up, etc. Also, on some blogs that I follow that have done really well in this bear market, I've noticed that bears are getting incredibly cocky. They are shorting this market big-time and they think they can't lose. Bulls are scared, bears are cocky. To a contrarian like me, all of this reveals a good possibility of higher market prices.

Blessings!
Jeff

 

[Steadygain]

Thank you SO MUCH Jeff !!

I have a mega tendency to get 'caught up' in the news and subsequently am stuck in G - when I should have stayed in High Risk.


BTW - Your comment about Family and Church was wonderful and it's so incredibly amazingly how blessed we are to have that grounding.


May the blessings come back to you 10 fold

Steady


I'll move my Private Account to High Risk today

 

[ContrarianJeff]

Well, this morning's continued rise makes me think that we are due for a significant pullback (and it may begin today). My plan was to stay in equities through the end of March. However, we are so ridiculously overbought right now, that I'm beginning to think that we are going to have a 5% to 7% pullback--maybe more. Perhaps we will continue going straight up, but the S&P is up 15 percent in a little over 5 days. Weeks like this are rare, and we're at least due for a pause. I'm going to 100% G and locking in some gains. This is, once again, a time when the limit on IFT's is essentially theft from the TSP. It's really disappointing, because I'd love to be out for a few days and get back in. But I'll just watch from the sidelines for the rest of the month. Best of luck everyone.

 

[DCguy]

unemployeement rate is approaching 10% and there is no real evidence the recession will indeed be over in 09. I think 15% gain in just one week doesnt make sense at all.

 

[ContrarianJeff]

By the way (not that anyone would care except me!), I've taken a short position in the market in my trading account this morning. So, in total, the combination of my current long TSP and short trading account, I'm basically flat.

 

[Guest2]

By the way (not that anyone would care except me!), I've taken a short position in the market in my trading account this morning. So, in total, the combination of my current long TSP and short trading account, I'm basically flat.

I Care and thank you for allowing us to know where you stand !