When the bear market gets going in earnest, it may not carry down to the 90% decline of the 1930s, but it may well be down over 60% before it's over. Anyway, that is what I think, still. Two years ago I was looking for a decline to 4000 on the Dow, and it still could happen. At that time I got into an unpleasant exchange with "Joseph G." (who disappeared some time ago from SI, I hope not for health reasons). He was annoyed at me because I had said "This is not 1929." At that time a decline to 4000 on the Dow would not have been nearly as severe as such a contraction would be now, credit inflation having been permitted to run absolutely wild since then--culminating in the huge increases of margin debt of the last two months.
Anyhow, I wasn't pessimistic enough at that time for Joseph, and he lit into me for being too confident about the mechanisms for stabilizing and keeping the economy from slipping into a depression. (I mean, that unemployment insurance in the event of large layoffs is automatically inflationary and stimulative, maintaining purchasing power in a way that could not be done in the 1930s).
I still do not think that it's 1929 all over again, but I think we are in for some sort of catastrophe that will go into the history books as another example of economic folly.
Because I really do not like the expiration/time value component of puts, even LEAPS (I can see serious erosion from that in my one EBAY put), I might double my short position in XLK (though I don't like its including a lot of MSFT). David Dreman recommended something like this recently, provided you had deep pockets. XLK doesn't move very fast either way (compared to options), but in a long, drawn-out decline it would work pretty well, and you wouldn't have any expiration. The assumption, of course, is that the markets really are topping out.
Which brings me back to your message, with which I completely agree. |
