CHESSNOID

It is hard to believe how bad it has been for the last 2 weeks in the stock market.  The top TV business news stories are now global credit crunch and worse times since the Great Depression.  The actual market was off over 20% in this short time period.

NEW YORK  (CNNMoney.com)

– The Dow ended its worst week ever Friday and capped a staggering eight-session selloff that has seen the blue-chip index fall 2,400 points.

This fall out has been unbelievable and compares even worse than than 1987 stock crash because it is over a period of time instead of just a one day shock.  I think most people are losing confidence rightfully so in this bear market and severe recession.

It will eventually turn around. I expect the market to bounce up soon. This stock market is definitely oversold.  There are great deals to find in the stock market right now.  I have always personally liked Google and Apple which are over 50% down from their all time highs. At the same time there is a risk that the overall market will drop another 10-20% before it bottoms.

I am staying out of the stock market because the risk and stress is just too much for me. I sold all my stock holdings before the market hit its high last year. Of course, I definitely sold too early but I rationalized I should focus on being happy with my overall returns from the last 6-7 years.  It is impossible to pick the market top and market bottom, but I was being defensive.  I had lost confidence in the market much earlier but never imagined it would become this severe.  I do blame most of it on the 3 stooges Bush, Bernanke, and Paulson and the continued bad decisions they have made. They have literally ran this economy into the ground.

Now that the market has come down so much, I really do want to jump back in and start dollar cost averaging into my stock picks.  I think long term they will definitely pay handsome returns. By long term, for me, I mean 10-15 years. My best guess is I will be buying stocks next year somewhere in the next 6-9 months.  I know the market will be going up soon, but I don’t want to get hammered in a bear market trap. I think any rallies in the short term will be met with investors waiting to recoup some of their losses so they can jump out of the market completely. I have been very lucky in stocks because I listen to my gut and do a lot of reading and research.  Thankfully, I am all in cash and am still ahead in the investing game.

I leave you with this trivia about stock markets and presidential elections from Forbes’ Investopedia:

A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a new U.S. president. According to this theory, after the first year, the market improves until the cycle begins again with the next presidential election.

The theory played out relatively reliably in the early to mid 1900s, but has since been disproved.

In 1937, Franklin D. Roosevelt’s first year, the market was down by 27.3%. The Truman and Eisenhower eras also started off with a down year in the stock market. The start of more recent presidencies, however, did not show the same pattern. In George H.W. Bush’s first year, the market was up 25.2%, and the start of both of Bill Clinton’s terms showed strong market performance – up by 19.9% and 35.9%.