Today's Market
by Dr Invest
I can't tell you whether the market will rise or fall, but I do know a crash when I see one. Most importantly, I know how to run when a crash is imminent.
There is nothing pretty about a crash, something has failed or something some one has misjudged brings about a chain of events that end in a catastrophe. What was once flying high, suddenly falls into the earth with a sickening thud, spraying dirt into the heavens from its awkward descent.
So too, is the crash of a favored stock that has carried you safely, but then suddenly, and with little warning falls while carrying your precious investment.
DID YOU HAVE YOUR STOP-SELL SET?
The only hope for the pilot of a maleficent aeroplane, is a parachute to safely bring the pilot back to earth. Likewise, the only hope for an investor in a volatile stock market is a STOP-SELL. When a stock crashes, I am less concerned about the state of the stock than getting out of the stock in a timely way.
Seeing the price of WMT and RTH beginning to falter and knowing that the SEQUESTER and more political wrangling was nearing, I moved my sell price near the last closing price. That one decision saved me a lot of grief, allowing me to get out of the stock before suffering painful losses today.
WHAT HAPPENED?
Someone leaked that February's sales at WMT were unusually low. That information brought on a rush to sell WMT (Walmart). You might remember that President Obama reminded us that the economy was recovering and economic growth was strong. (Please permit me a moment to laugh.) Consumers are not spending and this seems particularly obvious in February, since February is typically an off month economically. RTH is a ETF that holds a group of retail companies. RTH will not fair any better than WMT in the long-term.
OUTCOME
RTH was purchased for $44.75 and sold for $46.41, returning 3.7% in gain. WMT was purchased for $70.00 and sold for $71.05, returning 1.5% in gain and 1.155% in dividends. So roughly, I gained about 2.655%. Yes, there will be some taxes to pay, but less than today's losses.
I had expected that investments in these two ETFs would have returned 6% to 8% over the past 4 months. I was sorely mistaken. Here is the reason why. As in previous election years, I had expected a rise in the value of stocks. I didn't and couldn't have seen how powerfully the fiscal cliff would impact the value of stocks. I also did see how the anticipated battle over the debt ceiling would drive stocks down even further. Add to this the sequester (automatic cutting of budget) and a clear recessionary downturn in Europe, and you have the makings of a perfect storm.
This is tragic, but I am happy that I have averaged over 3% between the two investments. What is disappointing is that 6% to 8% couldn't have been returned during the earnings season.
Again, both WMT and RTH were conservative investments, designed to limit risks and enhance gains. After the major threats to an increase in the value of stocks have been erased, WMT and RTH would be likely candidates to be re-bought in the fall.
The Scheduled Threats
by Dr InvestI can't tell you whether the market will rise or fall, but I do know a crash when I see one. Most importantly, I know how to run when a crash is imminent.
There is nothing pretty about a crash, something has failed or something some one has misjudged brings about a chain of events that end in a catastrophe. What was once flying high, suddenly falls into the earth with a sickening thud, spraying dirt into the heavens from its awkward descent.
So too, is the crash of a favored stock that has carried you safely, but then suddenly, and with little warning falls while carrying your precious investment.
DID YOU HAVE YOUR STOP-SELL SET?
The only hope for the pilot of a maleficent aeroplane, is a parachute to safely bring the pilot back to earth. Likewise, the only hope for an investor in a volatile stock market is a STOP-SELL. When a stock crashes, I am less concerned about the state of the stock than getting out of the stock in a timely way.
Seeing the price of WMT and RTH beginning to falter and knowing that the SEQUESTER and more political wrangling was nearing, I moved my sell price near the last closing price. That one decision saved me a lot of grief, allowing me to get out of the stock before suffering painful losses today.
WHAT HAPPENED?
Someone leaked that February's sales at WMT were unusually low. That information brought on a rush to sell WMT (Walmart). You might remember that President Obama reminded us that the economy was recovering and economic growth was strong. (Please permit me a moment to laugh.) Consumers are not spending and this seems particularly obvious in February, since February is typically an off month economically. RTH is a ETF that holds a group of retail companies. RTH will not fair any better than WMT in the long-term.
OUTCOME
RTH was purchased for $44.75 and sold for $46.41, returning 3.7% in gain. WMT was purchased for $70.00 and sold for $71.05, returning 1.5% in gain and 1.155% in dividends. So roughly, I gained about 2.655%. Yes, there will be some taxes to pay, but less than today's losses.
I had expected that investments in these two ETFs would have returned 6% to 8% over the past 4 months. I was sorely mistaken. Here is the reason why. As in previous election years, I had expected a rise in the value of stocks. I didn't and couldn't have seen how powerfully the fiscal cliff would impact the value of stocks. I also did see how the anticipated battle over the debt ceiling would drive stocks down even further. Add to this the sequester (automatic cutting of budget) and a clear recessionary downturn in Europe, and you have the makings of a perfect storm.
This is tragic, but I am happy that I have averaged over 3% between the two investments. What is disappointing is that 6% to 8% couldn't have been returned during the earnings season.
Again, both WMT and RTH were conservative investments, designed to limit risks and enhance gains. After the major threats to an increase in the value of stocks have been erased, WMT and RTH would be likely candidates to be re-bought in the fall.
The Scheduled Threats
- European Recession
- U.S. Sequester
- Budget and Debt Ceiling
- Skirmishes and Wars
I remain invested in TIP, BND, and IAU. Should now be the time for a 10% decline in stock prices, this position would likely return some profits.
(note: the above information is for entertainment purposes only and not to be used as investment advice.)
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