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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: ggamer who wrote (75789)	12/16/2006 5:46:49 PM
From: Mr.Creosote	Read Replies (4) of 110194

Nice post, well said. I too have kept most of my money in MM funds over the last couple of years and my returns have suffered as a result. However, I have managed to cushion the blow somewhat compensating for my conservatism by buying naked calls or put/call spreads in the major indicies every 3-4 months. Having said that there are three basic assumptions that I have accepted as truths for myself over the years: (1) Nobody knows what will happen in the future. Nobody! (Don't believe anyone and especially don't trust your money to anybody who tells you they know what the market will do unless they have insider information.) (2) Today's economy/markets are extremely complex and are globally interacting in ways making it impossible to decipher what's going on RIGHT NOW let alone figuring what will happen next. (3) Nobody will ring a bell at the onset of a major bear market and "valuation" is NOT a necessary and sufficient condition for one to start. The 2000-2002 bear market could have easily started in 1996, 1997 but it didn't. The point is that even when you consider today's bearish arguments made by the smart folks in this forum the market could still defy everyone and continue to go straight up for another N years without any change in the current sentiment. WE JUST DON'T KNOW. Despite all the currently reported problems such as the housing market woes, the current level of consumer debt, etc. I personnaly cannot see a change in consumer behavior and consequently market behavior as long as jobs are plentiful and people earn enough money to pay for stuff. I look around and see people employed and earning/spending plenty of money. (As an example just look at the recent demand for the non-essential Sony PS3 game for $600.) Maybe everyone lives and exists in the Matrix and only a very very small number of people were given the opportunity to receive the blue pill and see "the truth". Of course there is a "poor class" (or "Brazil Americans" if you'd like) that's suffering in deep debt and is barely able to make ends meet. But every civilization, every country, and in every chronological era there has always been a poor class. Wealth distribution takes the form of a power law and this has been proven to exist in several different countries over many years. Our country is no different and I have found that most of us try every day to do those things that moves us up the wealth distribution curve (but we often end up doing things that take us in the opposite direction). So my advice is to listen to the smart people on this board as many interesting arguments and theories are discussed here. However never act on what is being said unfiltered and never associate any of the comments with a particular outcome in the markets be it real estate, stocks, bonds, gold, etc because we just don't know what will happen. (Although it sure is fun to speculate about potential outcomes.) Happy holidays.

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