I'm a famous stock, commodities, and currency trader. Mostly because of trading for the Chicago Trader Richard Dennis in the 1980s. I'm generally retired from trading except for my own account. I've been working on poverty and education initiatives mostly.
I’m seeing a big divergence in the risk/reward ratio for stocks and way too much pent up risk on the fundamentals that don’t correlate with stock performance in the U.S. stock market.
The last time I felt this way, I told my father-in-law to get out of his 401K when the S&P was at 1,550. He got talked out of doing anything by his banker who didn’t know fuck-all about stocks. The market dropped within a few weeks to 1,270 and then bounced around and I got my father-in-law and took him down to the bank myself when the market came back to 1,350 and he told his banker to liquidate everything while I was there to explain to his banker that I knew more about trading than he did and that he wanted out so please stop trying to convince him to get into something else. That was in April of ‘08, by March of ‘09, the S&P had halved to 670 so I saved him half his retirement savings.
DISCLOSURE: I have no positions in any markets.
Starting Wednesday this week, I posted the message below the line to my Twitter, StockTwits, Facebook and LinkedIn Connections as well as via email to my closest friends and on my blog at www.curtisfaith.com
I can’t exactly explain why but I feel even worse at the gut level about the markets right now. This is one of those intuitions that advise caution that I wrote about in Trading from Your Gut. They only come every few years and today was the strongest feeling I’ve ever had.
We might even see a test of the post crash lows of 670 again before the market comes back.
In short, be careful and keep your stops tight would be my advice. If you are not at least an expert amateur trader I’d get out and get to safe cash investments. You can always get back in in a few weeks or months if things stabilize and the risk goes down.
P.S. I didn’t warn my larger groups of friends the last time and I really wish I had. So this time I wanted to make a concerted effort to reach out to my blog readers.
The market may do fine. This is not a prediction of decline. It is a statement that if there is a decline, it could get ugly very quickly. Use great caution over the next few days or weeks!
If a crash does start, you can follow for updates if anything serious develops on Twitter at "inflector" and my blog at: http://www.curtisfaith.com
Here’s what I’ve been telling my friends today.
If any of you have a lot of money in the stock market. I'd suggest that now is a very good time to go to cash. 100% cash. If I were you I'd sell everything in my 401K etc. Sell mutual funds, etc. Individual stocks etc.
The market is ripe for a correction and it could get ugly again. My intuition tells me that it could get worse than we've seen in recent memory. Even worse than 2008 possibly.
I didn't warn my friends in 2000 even though I was working at an Austin Texas startup with a young brilliant trader name Andy Lam who worked for Steve Cohen at SAC Capital on an internship and who was so good that he still called tech stocks for Steve years later, and we both knew the tech crash was coming and called it within a month.
I didn't warn friends in 2008 but I only told my father-in-law. He was talked out of it by his banker/broker and I had to actually walk down to the bank with him so I could tell his broker that, in fact, I was more expert at trading than he was so would he please get Jim out of everything. That was when the S&P was 1,350, it had been 1,500 when I first warned my dad. It dropped to 660 as you all know.
I don't generally make predictions and this isn't a prediction exactly as the price could certainly go higher. The issue is that the risk/reward for staying in is wrong. The upside is much smaller than the downside and the market has just failed to exceed the highs of April of this year.
Historically that is not a good sign.
I just thought I'd let my friends who are not traders know.
Don't put the money in corporate bonds either. Put it in U.S. guaranteed funds or Treasury Bills preferably.
Europe's finances are too unpredictable, some countries are doing well but others are doing very poorly and you don't want to risk putting mony in Euros now because you don't know how well the Euro will hold up if Eastern Europe and Spain, Ireland, Greece and Portugal fall.
Definitely Avoid Gold!!!!
If you have your money in the big banks, BankAmerica, Goldman, Morgan Stanley, Wells Fargo, Shitytbank, etc. you might consider moving it out. If things get ugly again there will not be another bailout, the banks will go down and your money will be frozen if it is below the FDIC guarantee level and lost if it is above it. Any banks with exposure to the mortgage mess are at risk. The problems there are far worse than the media wants you to know. I believe that thousands will be jailed for fraud before this is all over, including hundreds of executives. Far worse than the S&L debacle.
Consider good small banks where the service is good like regional banks, community banks or credit unions. If you like your bankers ask them about the company, if they say it is good and well run then you are probably okay. If you are dealing with cogs in a poorly run machine, take your money out and find a good bank. Talk to the people, don't look at figures and facts and data so much.
And I would not wait until tomorrow. It could cost you a lot.- Curtis
P.S. Feel free to tell your close friends as any friend of yours if a friend of mine.