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The Intelligent Trader; June 30, 2009
Back then, inflation was the culprit that was destroying the stock market. For more than a decade stocks had done nothing and investors were beginning to throw in the towel.
Don’t get me wrong here – equities aren’t going the way of the Edsel. Even though the trigger for our current bear market was the mortgage industry, the bottom line is that a bear market is just that – a bear market and it is worth noting the similarities to the present market to what we saw during the 1968 - 1982 period.
Overall, most investors still think about investing in pretty positive terms. The 1990’s were a good time to be involved in the market. But, like all good things, the past few years have been a different story.
For the ten years ending 12/31/2008, the Lipper Large Cap Growth Fund Index sported a total return for the period of -34.27%. Investors putting money into a growth fund at the beginning of 1999 is still under water as this month comes to a close.
We get to a discussion as to the merits of ‘buy and hold’ another time.
Let’s take a look at the bear market of the 1970s.
The Dow - 1970 - 1980
Where the market of today differs from the bear market of the 70s can best be summed up in one word – debt. Given the breadth and depth of our debt situation, it’s going to take more than a fortnight or two to fix the economy and the market. This isn’t a computer meltdown or a Long Term Capital like collapse.
The debt level currently afflicting our country has reached epic proportions at the personal and government level. The government’s answer to all of this is to spend more money. The cure is to not keep spending money like there is no tomorrow.
To stop the bleeding, we need to apply a tourniquet. People are re-thinking their spending habits in order to reduce their debt load. After years of consuming too much, they are slamming on the brakes. Corporate America is also putting their spending habits under a microscope.
Now – if the Federal Government would only stop the spending …
Why the overkill?
My job as a trader is to make money and like I’ve said before – the key to success is trading the market you have and not the one that you want. Hope and Pray is not an investment strategy.
I’ve written at length about my 5 step process. I’ll not belabor the point here except to say that you can make money in this market. The key is to understand what kind of market you are dealing with.
Looking back to 1974-1975, stocks made a significant bottom then rose over the next year and a half. The Dow rose 70% plus which, if history is any guide, means that we have some room left on the upside. This is what has the talking heads babbling today.
The reality is this – Wall Street is either too good or too bad. It’s never average. This leads me to conclude that we may be overshooting the top side because a number of economists are starting to call the turn in the economy.
The rally of 1974-75 ended with the onset of the next bear market when the Dow gave back the obligatory 20% plus. Right now our indicators have the defense on the field.
So here’s the big picture. I don’t think history will repeat itself. I do think we’ll have to play the market from both sides – long and short. I do think that passive investing will get you killed. This market screams out for active investing. If you think buy and hold is the answer – think again.
That’s about it for now. Let me here from you if you have any questions.
Robert Christy
P.S. The currency market (forex) is the place to make money this year. If you’d like to know more about how you can participate in this, just send me an email and I’ll send the information to you.
P.S.S. Please fee free to forward this to your peers, friends and anyone you think would benefit from its contents. They will thank you for it - and so will I!
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Robert Christy is a professional currency trader, stock trader, money manager, author and speaker. Mr. Christy is the President CEO of Christy Investment Group, Ltd., a fee-only registered investment advisory firm. He is also the Managing Partner and Portfolio Manager of Crabapple Capital Group, LLC and the editor/publisher of The Intelligent Trader, a subscription based long/short trading service. At the time of publication, Mr. Christy may from time to time write about stocks in which he, Christy Investment Group Ltd, Crabapple Capital Group, LLC or The Intelligent Trader has a position. In such cases, appropriate disclosure is made. Under no circumstances does the information in this column represent a specific recommendation to buy or sell stocks. Mr. Christy appreciates your feedback and invites you to send it to rac@intelligent-trader.com .
Robert Christy The Intelligent Trader
The Christy Investment Group P.O. Box 625 Alpharetta, GA 30009-0625
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© Copyright 2009 Robert A. Christy, The Intelligent Trader
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