On September 30, 1999, the New York Times printed an article about pressure from the Clinton Administration on Fannie Mae to ease their credit requirements on loans to increase home ownership rates among low income consumers. The article contained this eerily accurate warning from Peter Wallison:
''From
the perspective of many people, including me, this is another thrift
industry growing up around us,'' said Peter Wallison a resident fellow
at the American Enterprise Institute. ''If they fail, the government
will have to step up and bail them out the way it stepped up and bailed
out the thrift industry.'' Check out the original article at: http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260&scp=1&sq=&st=nyt or click on his name above.
Could the current mess be the result of good intentions gone wrong? (Thanks to a colleague for alerting me to this article.)
With the Worden T2108 indicator (percentage of NYSE stocks closing above their 40 day average) at an extreme low, the market remains treacherous but may be near a bottom or bounce. Going back to 1986, market declines reached lower readings only twice; October 1987 at 0.5% and August, 1990 at 5.3%. All other bottoms occurred at 7% or above. So Friday's reading of 6% is about as low as it gets, except for the October 1987 decline of the Dow, falling 22.6% in one day. In comparison to the 1987 debacle, the current decline has been slow and measured. The 777 point decline last Monday was only 6.98%. In comparison, on October 28, 1929 the Dow fell 13.5% and on the following day, another 11.7%. Since the peak of the Dow a year ago, in October, 2007, the Dow is down a total of about 26%. So, in the context of the greatest market declines, the current decline has been relatively slow and small –at least thus far. I said small, not painless.
The gamblers among us might try to guess the bottom, or at least the bounce. With the GMI and GMI-R at zero, I prefer to wait on the sideline in cash until the new up-trend has begun.
On June 8, I wrote: "Last week I transferred all of my
pension money from mutual funds into money market funds. When I looked
at how most of the Dow 30 stocks are doing, I became very concerned of
the future of that index and the general market." I started this blog three years ago because I was so upset by the way the media pundits encouraged people to buy and hold stocks all through the 2000-2002 decline. I have successfully avoided all of the major market declines since 1995 and wanted to provide my audience with the tools I use to protect themselves in subsequent declines. I make no profit or commercial value from this blog. Again, the media pundits have tried to keep people in stocks all through this decline. I hope that some of my readers avoided the present decline by exiting the market last June when I did. My 401-K plan has escaped the current decline and has been in a money market fund since early June. Please let me know if any of you have had similar success.
