That Was The Week That Was-4th Week November

  The loss of lives when the Titanic sank were caused by the lack of lifeboats and the lack of understanding how to utilize those lifeboats to their maximum advantage. Some boats were overloaded and others were castoff virtually empty. The Titanic sank quickly and many lives were needlessly lost. The question I have to ask is:  Do You Have a Investment Life Boat Plan?  Global economic meltdowns could very well be upon you before you even realize the danger. Each investor should have their own specific plan for what to do when markets collapse. This is not a plan for market corrections but for a good old fashion Black Swan event that crashes markets and causes grown-ups to cry reading their investment statements. Your plan should be written because during an actual event, as history has shown,  you will not, in most cases, be able to think rationally. Your broker does not have the right to arbitrarily act for you without specific written instructions. Here are some questions you have to ask yourself to devise a feasible Investment Life Boat Plan:

• At what % loss do you implement your plan?
• Do you sell or hold?
• Do you sell everything or a portion?
• Do you come back in and when and at what number at what index do you buy?
• If you sell do you go to cash or to fixed investments, or some other investment?
• What specifically would you buy?
• Do you hold what you have and simply add to your portfolio? Buying what?
• Do you take advantage of the markets crash by buying Inverse ETFs? Which one would you buy?
• If you are an income recipient how do you weather the economic storm?

China ‘s Central Bank Reduced Rates to Jump Start Economy

November 21st two major central banks cut rates in order to reduce the possibility of deflation and boost the global economies. The People’s Bank of China and the European Central Bank signaled it may take new measures to boost inflation. This two weeks after the Bank of Japan said it would ramp up its own Quantitative Easing.  The global markets embraced the free money and the Dow opened plus 160 points before closing off its highs but still in record territory. WSJ 11/22/2014

 

 Do You Know This Man? He’s the guy who accurately predicted the crash of 2008. Peter Schiff, CEO of Euro Pacific Capital, and he’s back claiming the Federal Reserve unconventional,ultra loose, monetary policy has inflated the prices of stocks and bonds. He said what this economy needs to get itself back on track is an old fashioned recession. Schiff went on to say that gold will skyrocket and the dollar plunge as soon as the market realizes that stocks are overheated. He thinks that dollar could fall by 90%. There are others that scoff at Schiff’s reasoning and point to the fact that the Federal Reserve is not going to unwind its balance sheet anytime soon. Ethan Harris, global economist at Bank of America Merrill Lynch, said people confuse bank reserves with money. ‘Until banks start lending those reserves, those funds are not going to enter the economy.’ It’s a gradual process and not something that happens right away. MarketWatch.com., CNBC.com 11/22/2014

The Alan Greenspan Underwear Economic Indicator. Who remembers that? USA Today last Sunday reminded us of this 1970ish indicator created by Alan (I’m Taking A Bath!) Greenspan’s consulting firm. Basically it said that men’s underwear sales during good times were fairly flat but fell during bad economic times. Seems that there could be something to this as Victoria Secret sales are up along with HanesBrands. Let the good times roll, eh?

The NASDAQ Rocked Monday +42. It was a merry time if you were in the tech sector but the markets latest run has ignored banks, life insurance and REITs. While those businesses are fundamentally solid, according to Michael Kahn at Barrons.com, they pose a significant mixed message to investors. If the financials don’t pick up the pace and move forward they may be vulnerable to market weakness and technical failure. 11/25/2014 Barrons.com

Some Hedge Funds are having a dickens of a time making money in 2014. CNBC 11/24/2014 OPEC meeting decides if there is to be a cut in production. The cut has to be meaningful around 1.5 barrels a day. CNBC 11/24/2014

Those who believe in cycles, writes Avi Gilburt, author of The Elliott Wave Trader.net, there are indications that a ‘top’ could have been struck on Friday before last. Giburt’s analysis suggests either a pattern setup for a 300 point correction early in 2015, or to continue this rally into the end of the first quarter of 2015, before the 300+ point pullback takes hold. One way or another, he writes, there will be a higher market followed by a 300+ correction, which will then be followed by another 500 point rally. There are no indications that this bull market will not be seeing much higher levels in 2015, he predicts.