To the thread --
An observation from a semi-regular participant: assuming people are being more or less honest, and given the vicious nature of the financial markets (they find a way to make the most people lose the most money), I think this thread is flashing the most bearish signal of all.
We have Luc's spirit seemingly broken, Myth going long (INTC! Wow!), AR (sorry, AntMan <g>) making a very convincing argument that we are all fighting a losing battle with the conspiracy theories, etc., former heroes being mocked with no <g>'s -- Earlie, MB, Fleck. Tip has basically stopped posting.
I mean, at the risk of getting flamed, let's review the facts for a second.
Bond yields -- even assuming a move back to 5.75%, they are WAY above where they were at the beginning of the year. Yet at the same time, the stock market has taken off.
Quality of corporate earnings -- as Richebacher says, the 16% compounded growth rate in corporate profits between 1990 and 1997 was DUE ENTIRELY to 3 items. . . (1) corporate taxes were lowered; (2) interest rates came down dramatically; and (3) corporations were cutting back thus depreciation charges against earnings dropped. Ex these three impacts during the period, corporate profits actually increased at less than the post war 6% annual rates.
International scene -- we have troubling geopolitical issues between (a) North and South Korea, (b) India and Pakistan, and (c) China and U.S. A good friend told me today that China has drastically stepped up the importation of virtually EVERYTHING. Word is that the amount of buying is across the board (raw materials, tools,etc) and MASSIVE. Could this presage a Chinese devaluation in the near future? Coupled with Japan's recent intervention that took the yen down in value (which can't have made the Chinese exporters happy) I can see a Chinese devaluation as being the next flash point in the markets. Such a devaluation could spark another round of Asian devaluations and perhaps blow up some derivatives. If nothing else, it's something else to watch. Add to this the non-recovery recovery in Japan, and you have a scary world out there.
Y2K -- Major psychological impact at the very least. And it is rapidly approaching. Perhaps Don Hays is right about the mirror of last year. Imagine Y2K paranoia combined with the usual Sept/Oct uneasiness.
In short, there are a lot of candidates out there for a catalyst leading to a significant correction. A "BK"? Maybe not. But serious trouble yes. Do I know which it will be, or when the trouble begins? No. But performing a probability-magnitude analysis, I am willing to forego some seemingly easy gains on the upside and even lose some money on puts to avoid being completely wiped out in a severe correction. Maybe I lose a few grand here and there on puts at the worst, but I plan on being around to grab assets on the cheap in a major way when things shake out.
The whole point of MB's 90/10 options strategy is to avoid a crushing loss of capital. If you adhere to that strategy, which I personally think is brilliant, you will be just fine even in a worst case scenario.
Anyhow, enough rambling. Back to my Sunbeam cardboard box for some Mad Dog 20/20 (Thunderchicken has nothing on the Dawg!)
-- Robert
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