CHESSNOID

The stock market closed above its low numbers for the day.  I guess that is the good news. The bad news is it still closed down 2%.  That doesn’t seem like a lot but it really is if you annualized it.  Just imagine if you could make 2% on your money daily. Sweet! OK, wake up because that is like dreaming about what you would do if you won the lottery.

Tomorrow, the stocks should open to the upside but I think that is what happened yesterday. The news that keeps coming out about layoffs, new mortgage plans, and recession fears isn’t helping. I thought most people became numb to the news but apparently that isn’t true. I like to think we are oversold and that we are due for another stock market bounce, but that bounce seems to last only a day or two at the most. October was brutal and the worse month since forever and basically guaranteed Obama’s victory.

There are plenty of stocks that I like out there that seem so cheap. I said that last month and the month before, but the prices are still going lower. This does remind me of the dot.com bust where there were many deals to be had. I did wait for awhile before I started buying, but even back then I bought before the market bottomed. I would like to start doing the same thing here, but just don’t see the bottom near yet.

What I think will change my mind is when the housing crisis is put to rest. It won’t happen on Bush’s watch. It may even take a few years because the whole mess is complicated into fancy securities. I even think the housing market might come back before the stock market. That means being patient. I know money markets are paying 1-2% now, but that is still better than negative returns. I think preserving your capital is the most important thing you can do right for the long term.

The stock market may grind out for the next couple of months or even years downwards.  Remember in October, the market seemed to trade downward almost everyday for a total monthly return of -20%. That is completely ugly. At least in Vegas you have fun when you gamble.  Watching your portfolio shrink is just discouraging.  I still believe in stocks for the long term and will start buying again when I feel the opportunity is there for me.  For now, I will continue to stay on the sidelines.  I sold all my stocks before we hit the all time high last year and have stayed in cash ever since. Prior to that, I dollar cost averaged for the previous 6-7 years and made some great returns.  It was hard watching the markets go up after I sold, but I could see this housing crisis back then hurting our economy now.  For that, I am truly lucky and grateful.