Thrifty Trend

I wrote two weeks ago about “When you hear “Epic Financial Collapse”, you don’t ask “How Epic”… It’s definitely a big one. If you aren’t hurting - you must be special. This collapse is world wide and there haven’t been many hiding places. The following chart is an imaginative portfolio of etf-s which basically are a replacement for holding cash or money market. I called it “Go No Where” portfolio:

My real time watch list for this portfolio has been in the red (yet not as much) for every one of the last 7 business days.

Here’s how the holdings are divided:
TIP - 12.5%
USO - 2%
DBC - 2%
IAU - 15.5%
SHY - 25%
FXE - 24%
SHV - 19%

Is this the “bear market tactic” portfolio? Don’t know. I tried to minimize exposure to speculative and commodity trades and rely mostly on the main currencies. The reason I call it “Go No Where”, is because I don’t believe in its long term perspective. That being said, it’s a lesson to be learned - each one of these holdings is better off than 99% of stocks when the S&P500 drops below its 200 days moving average. OK, maybe USO isn’t - but that has a 2% allocation, only to keep up with the long term affect of inflation which will kick in due to the national debt.

I heard someone say that if the Dow Jones continue to lose 600 a day every day, the crisis will soon be over - because it will take 3 weeks to reach Zero. I’m sure it was a joke, but the lesson is clear: While the bottom is no where in sight - it has to be somewhere. And it will reveal itself only when the big money holders stop panicking and start buying. Will they at Zero? I won’t put a bet on any number - but Zero is extremely unlikely.

I mentioned before that I think IHI and IYK are “safe” equity ETF-s. The action has proved otherwise, but it defeats logic. I explained why EMB and FNMIX do what they do - and why I think they should recover unless we see a whole country default, let me take a poke at IHI and IYK. The title says it all. Panic. I’m not rich, but if I was like Bill O’Reilly, and my millions accumulated in recent years would to drop by 40-60% in two weeks - I’d be pissed and panicky too. Why risk it further? Who cares if Medtronics and Boston Scientific aren’t really going away? Why own it? It doesn’t help that certain “financial gurus” are panicking on the air (Cramer) - and telling everyone “run for the hills”.

Unlike tops - where the very last buyers are regular Joe’s who are euphoric regarding the state of the market, bear falling knife patterns have a different dynamic. Further collapses bring in further panic - and those with the most to lose will be the very last to “join the party”. It takes an act of absolute despair to sell at 70% loss, and many portfolios of rich people and not so rich people who simply rely on having some pension funds are approaching that percentage. At this point - massive panic will prevail - and the value of shares could “seem” like zero.

Now I depressed my self. Time for a demotivator:

(click on the image and browse their collection, it’s really funny)

I have other great posts in the works - and they’re coming in the pace of about once a week (when I get the time to it or the urge to express my self to the void that is the internet blogosphere). Stay Tuned. Cheer Up. Always look forward and learn from mistakes. You control your fate, destiny and have the power to roll with the punches.

Cheers!