Hard Times Investing Update 8/8/2011

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Back in February of this year, I went 100% OUT of the stock market (other than a couple of small-change speculative items).  Paraphrasing what I said at the time in an email to a trusted friend, “I’ve been too lucky for too long.”  My market-exit-point was near but not at the market high for the year; for me (and most others), hitting exact market tops and bottoms is impossible.  The best we can hope for is to come close to the mark.  My wife quit her job in February so our household income went down and our expenses went up (for example, our health insurance is now $14,412 annually) so my tolerance for risk suffered a hit.  The markets historically have been subject to manipulation, mostly illegal unless done by the government.  IMHO, the Fed’s Quantitative Easing and the program trading by the Quants at the major trading outfits make the market a “less level” trading field than ever before.  While no market event surprises me, things akin to the Flash Crash are most unnerving.  On July 25, 2011, unbelievably huge trading volume for the DOW and the S&P-500 should have been headline news but was not.  Marketed as prime rib the equities markets smell like rotting flesh. 

Via merit, manipulation, or Federal Reserve Masturbation, there is always a chance that the markets will rally from here and sustain unheard of record levels, which would cause me some remorse for staying out of the game.  However it all plays out, I have to do what I believe is best for my family and me.  I trust my market-models, and the S&P-500 around the 1285 level for this year is my comfort zone.  The current selloff is not worrying me, my model said that the S&P-500 was overpriced and a range between 1158 and 1415 would be “normal” for this year.  Should the S&P-500 drop to around the 1029 level I would consider putting some money back into equities but I doubt that I will ever again risk (for me) great sums; I am just getting too old and time favors the young.

When do I believe the S&P-500 will return to the pre-crash levels of the upper 1500s?  My non-scientific, computerized, wild ass guess, investment projection model says somewhere around the 1587 level will be my S&P-500 comfort zone for the year 2014.  However, the ever-ominous dark cloud of fate warns that the markets don’t give a damn about what my model says.  OBLIGATORY DISCLAIMER: Nothing in this blog entry is financial advice, or advice on investing.

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