Tony Snow was one of the world's good guys. I loved him for all he did - the Fox News Sunday anchor, the radio show, the press secretary gig with Bush - but most especially I loved his syndicated column, which I read for years before he dropped it to focus on other things. His decency, his humanity, his love of life, family, and country, always shone through. There was a point in the mid-nineties when I withheld judgement on the great moral issues of the day until I read Tony's column and took his views into account. He saw things I didn't see and in ways I couldn't; his deep faith led him to deep wisdom of earthly matters and he delivered his verdicts with a cleared-eyed and joyful optimism. I always learned something from Tony, but mostly I was always reminded of something; what it means to be a truly good person. Tony was.
The world is a poorer place today. Heaven is a little brighter. Rest easy my friend.
Saturday, July 12, 2008
Beating the Bear
I'm fairly close to the Fannie Mae/Freddie Mac debacle. Since I want to maintain my anonymity on this blog I will no go any further in my explanation than that. However, my main concern during the morning hours yesterday when both GSE's stock prices were plummeting, was not their ultimate fate - there is no way the U.S. government will let them fail - but rather the stock market in general. Or, to put it more bluntly, my own portfolio. As the Dow, NASDAQ, and S&P were spilling blood, I carefully watched as my own portfolio ended up actually making money for the day. Why? One reason is I am completely out of financials, which is a broken sector and will remain broken for the foreseeable future. As I've mentioned before, trying to catch the bottom here is a fool's errand. I cashed out of Citigroup the Monday after I posted about it a few weeks back, at a fairly significant loss. I do still own Mastercard, but it's not subject to the same pressures that the banks and investment firms are. I also own some pharmaceutical-related stocks. Everything else in my portfolio consists of energy, commodity, and material-related stocks; steel, coal, copper, oil, deep-water drilling, natural gas, oil sands. These spaces, which have been working for years, looked ready to crack a few weeks ago - they all pulled back significantly. That wasn't really a surprise because in a real bear-market the sectors that had been working are the last to be taken out. I expected the downward trend would continue. But these sectors seem to have stabilized now and may be headed back up. The oil story is a real one folks - we don't have enough, period. Anyone who expects oil to return to the price levels of a few years ago is fooling themselves. The global expansion is for real too: Brazil, China, India, Russia, the Asian economies, while having slowed a bit recently, are all still expanding significantly. I'm staying in these spaces until I see they don't work anymore; but with the market as schizophrenic as it's been lately, it sure is tough on the nerves.
The 68 million acre lie
To follow up on my last post, the main (the only?) Democratic party talking point against new drilling is that the oil companies already have drilling leases on 68 million acres of land but have not touched it, so why should be we allow ANWR and off-shore drilling?
The Wall Street Journal has offered Obama and other Democrats who spew this nonsense some remedial education. Read the whole thing so you're not mislead by politicians who want to keep you ignorant.
"I want you to think about this," Barack Obama said in Las Vegas last week. "The oil companies have already been given 68 million acres of federal land, both onshore and offshore, to drill. They're allowed to drill it, and yet they haven't touched it – 68 million acres that have the potential to nearly double America's total oil production."
The Wall Street Journal has offered Obama and other Democrats who spew this nonsense some remedial education. Read the whole thing so you're not mislead by politicians who want to keep you ignorant.
More on Speculation
After promising more redistributionist programs designed to take money from the most successful of us and transfer it to the less successful, Barack Obama said again yesterday that he'd go after oil speculators once he's elected. "I'm going to crack down on oil speculators who may be artificially driving up the price of oil."
Sigh. I've got news for Senator Obama. Last I checked, there were more NYMEX oil contracts on the short side than the long side. In other words, more people were speculating that the price of oil would be going down rather than up. If Obama were to curb or end speculating under these circumstances, the short-term price of oil would almost certainly go up.
What about the long-term price? James Hamilton, over at the Econbrowser blog, wrote this excellent analysis of the effects of speculation in the real world back on May 22:
Read the whole thing here. In a nutshell, Hamilton explains why the price of oil will always fall back to a price that is "governed by the underlying physical fundamentals." It's simple supply and demand. Once consumer behavior changes - i.e, when demand destruction sets in, as we've seen in recent months - producer's behavior will also change on the supply side; they'll produce less oil. If producing less oil for a higher price is more profitable for oil companies, than they would have been doing so all along, profit maximization being the ultimate goal of any money-making endeavor. So speculation may have short-term affects on price but in the end the economic fundamentals will rule; indeed, speculation may well end up bringing the market back into equilibrium sooner than otherwise. And speculators who ignore these facts will get burned.
Hamilton has another terrific post on speculation here, taking some other economists to task for some of their outrageous claims regarding the effects speculation has on the price of oil.
Obama is a demagogue; a slick one, but one nonetheless. He is playing off people's fears and ignorance, looking for bogeymen (i.e. oil executives) and pointing fingers. The energy fix we find ourselves in right now is, to be clear, a shortage of light sweet crude. Everyone knows where the solutions lie; more drilling, in ANWR and off-shore, more nuclear power, the exploitation the oil shale and oil sands territories, the use of more coal and natural gas. But none of these solutions can be found in Obama's so-called energy plan. Rather, he wants to redistribute $50 billion more in rebates and "crack down" on oil speculation. How do either of these "solutions" produce more oil?
Sigh. I've got news for Senator Obama. Last I checked, there were more NYMEX oil contracts on the short side than the long side. In other words, more people were speculating that the price of oil would be going down rather than up. If Obama were to curb or end speculating under these circumstances, the short-term price of oil would almost certainly go up.
What about the long-term price? James Hamilton, over at the Econbrowser blog, wrote this excellent analysis of the effects of speculation in the real world back on May 22:
There are individuals who use this physical commodity-- namely, consumers who use the gasoline to drive their cars-- and separate entities that produce it-- most importantly today, the national oil companies of the oil-producing countries. The key question is, How would the behavior of these two parties change as a result of a new higher price for the basic commodity they are consuming or producing?
If your answer is, neither consumers nor producers change anything they do at all in response to the price increase, then I agree you could make a case that speculators by themselves could make that price any old number. But I don't believe it is accurate to assume that both consumers and producers would do exactly the same thing, no matter how high the price goes. At a higher price of gasoline, consumers will use less of the physical commodity. Not much less, I grant you, and that's why I agree that speculators are able to have more of an influence than I might have expected. But I would insist that if you drive the price of gasoline sufficiently high, consumers will respond.
And that's a problem for any "paper oil" theory-- if consumers are buying less of the physical commodity, what's happening on the production side? If production doesn't change, then oil must be piling up somewhere in inventory, possibly some just idling in tankers in the Persian Gulf. But no one has an incentive to keep adding more and more oil to inventory forever. So ultimately, the "paper oil" theory is going to require a reduction in the production of actual physical oil.
And that leads you to the question, Why would producers want to cut production? If the answer is, they make more profits with lower production and higher prices, then they would want to make those same production cutbacks with or without the speculation, and you'd have to blame the whole phenomenon on the operation of those profit calculations themselves, with the speculators just a device that got us to equilibrium between supply and demand more quickly.
Now, I personally do accept the view that the "paper oil" speculation has made a contribution in recent months to the increase in the price of physical oil. I believe that this speculation has resulted in a slight decrease in the quantity demanded that has required some modest supply reductions or accumulation of inventory by producers. But I expect that producers will find these changes not to be in their best interests as the demand adjustments become more prominent, at which point the price must return to that governed by the underlying physical fundamentals.
Ultimately, the price must be such that the quantity of physical oil demanded at that price is equal to the quantity of physical oil supplied. Any speculator who promises on paper to buy oil for more than the physical stuff is actually selling for will find themselves at that point with a big, fat paper loss.
Read the whole thing here. In a nutshell, Hamilton explains why the price of oil will always fall back to a price that is "governed by the underlying physical fundamentals." It's simple supply and demand. Once consumer behavior changes - i.e, when demand destruction sets in, as we've seen in recent months - producer's behavior will also change on the supply side; they'll produce less oil. If producing less oil for a higher price is more profitable for oil companies, than they would have been doing so all along, profit maximization being the ultimate goal of any money-making endeavor. So speculation may have short-term affects on price but in the end the economic fundamentals will rule; indeed, speculation may well end up bringing the market back into equilibrium sooner than otherwise. And speculators who ignore these facts will get burned.
Hamilton has another terrific post on speculation here, taking some other economists to task for some of their outrageous claims regarding the effects speculation has on the price of oil.
Obama is a demagogue; a slick one, but one nonetheless. He is playing off people's fears and ignorance, looking for bogeymen (i.e. oil executives) and pointing fingers. The energy fix we find ourselves in right now is, to be clear, a shortage of light sweet crude. Everyone knows where the solutions lie; more drilling, in ANWR and off-shore, more nuclear power, the exploitation the oil shale and oil sands territories, the use of more coal and natural gas. But none of these solutions can be found in Obama's so-called energy plan. Rather, he wants to redistribute $50 billion more in rebates and "crack down" on oil speculation. How do either of these "solutions" produce more oil?
Friday, July 4, 2008
Little Children, and Old-Fogies
I've paid little attention to my Netflix queue lately; we've been working our way through episodes of The Wire and of the great BBC crime series Prime Suspect, which have been at the top of the queue for some six months or so. We sent back the last of the Prime Suspect disks last week and a few days later the movie Little Children showed up in the mail. I don't remember why I placed it in my queue but it was certainly on someone's recommendation, or at least because I read something good about it from someone I respect. I wish I could remember who so I can make a point never to follow their advice again.
I am, when it comes to modern culture, completely out of it. I never, and I mean never, listen to modern popular music. I don't even know the names of the bands or singers who are popular these days. If you asked me to name a single song that has been a top-40 hit over the past decade I couldn't do it, so separated I am from that culture. For me, it simply doesn't exist.
My distance from modern movies is not so complete. I still hear about most new-release movies, and read about some of them. On occasion, I am actually intrigued by one of them and desire to see it. But the vast majority of them pass me by with barely a notice. Which is fine; I've seen enough of the dreck that modern Hollywood produces to know that I'm not missing much.
When Little Children arrived, my wife, who handles the mail, was intrigued by the blurb on the Netflix sleeve. This is a major event in itself; rarely does she look forward to watching movies but she usually enjoys the good ones, and we quite often have short conversations afterwards about what worked and what didn't. I enjoy this a lot. We come at things from different perspectives and she'll often point things out that I've missed because we notice different things. A wise and perceptive woman I am married to, and I've learned over the years never to dismiss her take on something, even if it differs completely from mine. She's more often correct than not.
So we watched it. Or, to be more accurate, we watched about thirty minutes of it. By the time one of the characters started to whack off to porn in his office at work, we'd both had enough. Little Children is supposed to be some deep statement about the state of modern marriage and suburban life; but it is puerile, tendentious, and false. The little children here are supposed to be the adults portrayed in the movie but the term could also describe the folks who made this movie and who hold such views about a world they clearly know little about. Besides that, it is a badly made movie. After virtually every scene, a narrator's voice enters to tell us what is was we just saw, what the characters are thinking, and what we're supposed to think about it; in other words, the things most movies convey without the use of narration - part of the art of movie-making. It's as if they're scared we'll miss the point, but there is really no chance of that; each point is driven home with a hammer, then the narrator comes in to drive the nail in a little deeper. Which is not surprising; the filmmakers who have such obvious contempt for the regular people portrayed on the screen seem to have a similar contempt for the audience. They throw subtlety aside, assuming we're too stupid to get the point.
And what are the points? Suburban life kills the soul. Modern marriage is a lie. We'd all be happier if we acted on our secret desires. We're all hypocrites. Sigh. Aren't we all tired of this by now? The cynical, hipster, ultra-cool attitudes held by pop-culture mavens? In the fake world of Little Children, who are the sympathetic characters? Why, the bad mother who has affairs and the man she is having the affair with, a stay-at-home dad who has failed the bar exam multiple times. The stay-at-home moms don't fare so well. They are portrayed as lifeless, soulless, Stepford moms, who have no life beyond their children. The out-of-work policeman is portrayed as a slight lunatic, obsessed with making life hell for a recently released flasher who lives in the neighborhood. You're supposed to feel for the flasher. The wanker in his office, the husband of the woman having the affair, I'm not sure what we were supposed to think of him because we turned it off at that moment - it's really not something I've ever desired to see on film. Right before this we learn that there are others in the neighborhood who also have secrets obsessions - one likes to dress up as a woman behind closed doors, the other is a closet homosexual who has anonymous sex in seedy men's restrooms. You see? It's when we act on our shocking desires that we come closest to being real. Even the robotic women who take their children to the park each day, they too have these desires - they all lust after the guy who can't pass the bar - but they are too repressed to act on them. Suburban bigotry and intolerance are keeping us down, folks.
I for one have had enough of this type of 'art.' Now, I never intended this blog to be a constant rant and I will try in the near future to think of things to write about that are light and happy. Still, after watching a movie like this, it becomes all the more clear to me that I am out of step with the opinion-setters of the world. Call me old-fogy. I checked the reviews of Little Children on Rotten Tomatoes this morning and was not surprised that it was well-received. The people who write the reviews accept the attitudes of the pop-culture that emanates from Hollywood. I don't. I'll have to look backwards, as is my wont, to find art - movies, music, books - that speak to me. And that's not a problem; I've been doing it for years. I'm not dropping out. I'll still seek out the good in what's new. I'll endeavor not to become one of those tiresome bores who insists everything was wonderful back in his day and the world has gone to hell-in-a-hand-basket. I am an optimist, who looks forward to the future. But it will be a future without movies like Little Children.
Finally, to prove that I am not some prudish bore who is threatened when presented with uncomfortable material, I'll make a recommendation. If you are truly interested in stories that deal with adultery, the stifling aspects of marriage, the secret lives of others, read Chekhov's short story Lady With a Lapdog. It is brilliant. The protagonist Gurov also believes "that every man had his real, most interesting life under the cover of secrecy and under the cover of night." There is more understanding of human nature in a single paragraph here than in the whole of Little Children. Chekhov was a master of course, and an adult, unlike the makers of Little Children. He tells a real truth here; not the whole truth, or even close it, but a universal truth that all of us - the adults in the audience anyway - can understand.
I am, when it comes to modern culture, completely out of it. I never, and I mean never, listen to modern popular music. I don't even know the names of the bands or singers who are popular these days. If you asked me to name a single song that has been a top-40 hit over the past decade I couldn't do it, so separated I am from that culture. For me, it simply doesn't exist.
My distance from modern movies is not so complete. I still hear about most new-release movies, and read about some of them. On occasion, I am actually intrigued by one of them and desire to see it. But the vast majority of them pass me by with barely a notice. Which is fine; I've seen enough of the dreck that modern Hollywood produces to know that I'm not missing much.
When Little Children arrived, my wife, who handles the mail, was intrigued by the blurb on the Netflix sleeve. This is a major event in itself; rarely does she look forward to watching movies but she usually enjoys the good ones, and we quite often have short conversations afterwards about what worked and what didn't. I enjoy this a lot. We come at things from different perspectives and she'll often point things out that I've missed because we notice different things. A wise and perceptive woman I am married to, and I've learned over the years never to dismiss her take on something, even if it differs completely from mine. She's more often correct than not.
So we watched it. Or, to be more accurate, we watched about thirty minutes of it. By the time one of the characters started to whack off to porn in his office at work, we'd both had enough. Little Children is supposed to be some deep statement about the state of modern marriage and suburban life; but it is puerile, tendentious, and false. The little children here are supposed to be the adults portrayed in the movie but the term could also describe the folks who made this movie and who hold such views about a world they clearly know little about. Besides that, it is a badly made movie. After virtually every scene, a narrator's voice enters to tell us what is was we just saw, what the characters are thinking, and what we're supposed to think about it; in other words, the things most movies convey without the use of narration - part of the art of movie-making. It's as if they're scared we'll miss the point, but there is really no chance of that; each point is driven home with a hammer, then the narrator comes in to drive the nail in a little deeper. Which is not surprising; the filmmakers who have such obvious contempt for the regular people portrayed on the screen seem to have a similar contempt for the audience. They throw subtlety aside, assuming we're too stupid to get the point.
And what are the points? Suburban life kills the soul. Modern marriage is a lie. We'd all be happier if we acted on our secret desires. We're all hypocrites. Sigh. Aren't we all tired of this by now? The cynical, hipster, ultra-cool attitudes held by pop-culture mavens? In the fake world of Little Children, who are the sympathetic characters? Why, the bad mother who has affairs and the man she is having the affair with, a stay-at-home dad who has failed the bar exam multiple times. The stay-at-home moms don't fare so well. They are portrayed as lifeless, soulless, Stepford moms, who have no life beyond their children. The out-of-work policeman is portrayed as a slight lunatic, obsessed with making life hell for a recently released flasher who lives in the neighborhood. You're supposed to feel for the flasher. The wanker in his office, the husband of the woman having the affair, I'm not sure what we were supposed to think of him because we turned it off at that moment - it's really not something I've ever desired to see on film. Right before this we learn that there are others in the neighborhood who also have secrets obsessions - one likes to dress up as a woman behind closed doors, the other is a closet homosexual who has anonymous sex in seedy men's restrooms. You see? It's when we act on our shocking desires that we come closest to being real. Even the robotic women who take their children to the park each day, they too have these desires - they all lust after the guy who can't pass the bar - but they are too repressed to act on them. Suburban bigotry and intolerance are keeping us down, folks.
I for one have had enough of this type of 'art.' Now, I never intended this blog to be a constant rant and I will try in the near future to think of things to write about that are light and happy. Still, after watching a movie like this, it becomes all the more clear to me that I am out of step with the opinion-setters of the world. Call me old-fogy. I checked the reviews of Little Children on Rotten Tomatoes this morning and was not surprised that it was well-received. The people who write the reviews accept the attitudes of the pop-culture that emanates from Hollywood. I don't. I'll have to look backwards, as is my wont, to find art - movies, music, books - that speak to me. And that's not a problem; I've been doing it for years. I'm not dropping out. I'll still seek out the good in what's new. I'll endeavor not to become one of those tiresome bores who insists everything was wonderful back in his day and the world has gone to hell-in-a-hand-basket. I am an optimist, who looks forward to the future. But it will be a future without movies like Little Children.
Finally, to prove that I am not some prudish bore who is threatened when presented with uncomfortable material, I'll make a recommendation. If you are truly interested in stories that deal with adultery, the stifling aspects of marriage, the secret lives of others, read Chekhov's short story Lady With a Lapdog. It is brilliant. The protagonist Gurov also believes "that every man had his real, most interesting life under the cover of secrecy and under the cover of night." There is more understanding of human nature in a single paragraph here than in the whole of Little Children. Chekhov was a master of course, and an adult, unlike the makers of Little Children. He tells a real truth here; not the whole truth, or even close it, but a universal truth that all of us - the adults in the audience anyway - can understand.
Thursday, July 3, 2008
The Sick-Souled Religion
Hat tip to Jay Nordlinger over at NRO for directing me to this excellent Wall Street Journal article by Bret Stephens, in which Stephens discusses the motives for the rigidly held beliefs of the global warming crowd even in the face of mounting evidence that the world has entered into a cooling phase. The global warming movement has often been likened to a religion in which one must suspend credulity, analysis and rational thinking in order to adhere to a higher truth, a higher purpose. Read the whole thing but let me highlight a couple of excerpts from the column which jibe perfectly with my own view that a distrust of capitalism and its success is imbedded deep into the souls of the global warming hysterics:
Of course, Al Gore is the unquestioned leader of this movement to drastically alter how we live, but others in high-places have drunk the kool-aid, including the execrable Harry Reid, whose comments this week can fairly be described as sick-souled:
These are the people who will be the making the decisions come November.
The column ends with this brilliant insight:Socialism may have failed as an economic theory, but global warming alarmism, with its dire warnings about the consequences of industry and consumerism, is equally a rebuke to capitalism. Take just about any other discredited leftist nostrum of yore – population control, higher taxes, a vast new regulatory regime, global economic redistribution, an enhanced role for the United Nations – and global warming provides a justification.
Finally, there is a psychological explanation. Listen carefully to the global warming alarmists, and the main theme that emerges is that what the developed world needs is a large dose of penance. What's remarkable is the extent to which penance sells among a mostly secular audience. What is there to be penitent about?
As it turns out, a lot, at least if you're inclined to believe that our successes are undeserved and that prosperity is morally suspect. In this view, global warming is nature's great comeuppance, affirming as nothing else our guilty conscience for our worldly success.
In "The Varieties of Religious Experience," William James distinguishes between healthy, life-affirming religion and the monastically inclined, "morbid-minded" religion of the sick-souled. Global warming is sick-souled religion.
Of course, Al Gore is the unquestioned leader of this movement to drastically alter how we live, but others in high-places have drunk the kool-aid, including the execrable Harry Reid, whose comments this week can fairly be described as sick-souled:
Watch the video and get Captain Ed's comments on this nonsense here. We now have two nationally-elected Democrats coming out in favor of nationalizing the U.S. oil industry. We have the Senate majority leader claiming that "we’ve got to stop using fossil fuel." We have attempts from the Democratic Congress to sue OPEC and to curb speculation in crude markets. The same Congress is hauling oil executives up to Capital Hill to defend themselves and their industry, and calling for windfall profits taxes. We have Barack Obama and Nancy Pelosi insisting that "we can't drill our way out of this."“Coal makes us sick. Oil makes us sick. It’s global warming. It’s ruining our country, it’s ruining our world. We’ve got to stop using fossil fuel.”
These are the people who will be the making the decisions come November.
Sunday, June 29, 2008
When Value is Not Value
The market teaches hard lessons. One is that, in a bear market, what looks like 'value' is often anything but. The financial sector stocks have been beaten down hard over the past year. The XLF, the ETF that tracks the financials, now sits at $20.56, down from a high of nearly $37 - a drop of about 45%. Many individual stocks have fared even worse. Citygroup (C) reached a high of nearly $53 last year. It dropped under $25 in January and then below $20 in May, bouncing off those lows both times. When it hit $21 a few weeks ago I thought I saw value and I grabbed it, my rationale being that, at 40% of its value of a year ago, how much lower could it go?
Ahem. Citygroup, to my dismay, closed at $17.25 on Friday, having dipped into the $16s interday - about a 20% haircut for me, to this point. Trying to pick a bottom for beaten down stocks in a bear market is a fool's errand, and this time I'm the fool. Trying to find 'value' in this environment is folly. When in a bear market, stick with what's working until it's clear it doesn't work anymore. Currently that would be oil, natural gas, coal, steel, agriculture, railroads, materials; in other words, all the sectors that benefit from the global infrastructure expansion. If you drop it on your foot and it hurts, buy it. Luckily, most of my money is in these sectors, and City is my only major mistaken play over the past few months.
So, if a stock in a beaten down sector is still heading south, like City and almost every other financial, don't even think about buying it. Don't touch it until there is clear evidence that it's moving up and the bad times are over. Yes, you may miss the initial pop back up but that's okay. You'll avoid idiotic trades like my City fiasco.
I still think City could work over the long term. I went into it a few weeks ago thinking it could be a double in five years, and who knows, it still might be. But I'm far less confident now than I was, simply because I'm far less confident about the economy, and the market, in general. With oil prices where they're at, and probably heading higher, I think we could be in a long-term range-bound market, like the 1970s. During the 1970s, high energy prices, inflation (which is again on the horizon) and global instability put a hammer lock on the U.S. economy, and the world economy as a whole (while the ties are still there, the world economy was far more reliant on economic conditions in the U.S. then than it is now.) The stock market ended that awful decade at approximately the same level it began. If we are indeed entering into such an environment again, sticking your money in an index fund that tracks the general market is a bad play - your money goes nowhere, and gets devalued by inflation. You'll end up poorer.
But, as the saying goes, there is always a bull market somewhere. The smart investor will be on the lookout for these money-making opportunities. So my advice to myself is, again, find out which sectors are working and stick with them until they no longer work. Pay attention - you can't simply look at your account once a year and expect everything will work out. But you don't have to analyze every company out there either. If you pay general attention to the economy and the markets, you can invest in ETFs that track the sectors that are working. Forget S&P index funds. In an inflation-laden, range-bound market, they won't work.
DISCLAIMER: I'm strictly an amateur investor. The notions in this post are not meant to be advice to any reader on how to handle your own money. They are simply my own musings about the market and how I myself intend to proceed. Anything you do, you do at your own risk.
Ahem. Citygroup, to my dismay, closed at $17.25 on Friday, having dipped into the $16s interday - about a 20% haircut for me, to this point. Trying to pick a bottom for beaten down stocks in a bear market is a fool's errand, and this time I'm the fool. Trying to find 'value' in this environment is folly. When in a bear market, stick with what's working until it's clear it doesn't work anymore. Currently that would be oil, natural gas, coal, steel, agriculture, railroads, materials; in other words, all the sectors that benefit from the global infrastructure expansion. If you drop it on your foot and it hurts, buy it. Luckily, most of my money is in these sectors, and City is my only major mistaken play over the past few months.
So, if a stock in a beaten down sector is still heading south, like City and almost every other financial, don't even think about buying it. Don't touch it until there is clear evidence that it's moving up and the bad times are over. Yes, you may miss the initial pop back up but that's okay. You'll avoid idiotic trades like my City fiasco.
I still think City could work over the long term. I went into it a few weeks ago thinking it could be a double in five years, and who knows, it still might be. But I'm far less confident now than I was, simply because I'm far less confident about the economy, and the market, in general. With oil prices where they're at, and probably heading higher, I think we could be in a long-term range-bound market, like the 1970s. During the 1970s, high energy prices, inflation (which is again on the horizon) and global instability put a hammer lock on the U.S. economy, and the world economy as a whole (while the ties are still there, the world economy was far more reliant on economic conditions in the U.S. then than it is now.) The stock market ended that awful decade at approximately the same level it began. If we are indeed entering into such an environment again, sticking your money in an index fund that tracks the general market is a bad play - your money goes nowhere, and gets devalued by inflation. You'll end up poorer.
But, as the saying goes, there is always a bull market somewhere. The smart investor will be on the lookout for these money-making opportunities. So my advice to myself is, again, find out which sectors are working and stick with them until they no longer work. Pay attention - you can't simply look at your account once a year and expect everything will work out. But you don't have to analyze every company out there either. If you pay general attention to the economy and the markets, you can invest in ETFs that track the sectors that are working. Forget S&P index funds. In an inflation-laden, range-bound market, they won't work.
DISCLAIMER: I'm strictly an amateur investor. The notions in this post are not meant to be advice to any reader on how to handle your own money. They are simply my own musings about the market and how I myself intend to proceed. Anything you do, you do at your own risk.
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