Phantasmix

This was brought up in the comments, and I’d like to discuss this topic separately. In my opinion, it makes sense to only short both long and short ETFs. The way they’re structured, both long and short ones have a high “leak” rate due to the daily rebalancing and expense fees. By always being on the short side, you win just a little bit more. So for example, if you want to…

• long financials -> short SKF
• short financials -> short UYG
• long commercial RE -> short SRS
• short RE -> short IYR, etc. etc.

Some visuals to back up my strategy…

… or even an evening star, instead of hammer, also bullish.

Looks like (SPY: 124.42 +0.31%) will print a hammer candle today. Up and away on Monday!

The stock market appears to follow a 10-year cycle. During the first half of the decade equity prices on average do not increase, however in the second half they clearly do. In addition, during the 20th century U.S. equities have demonstrated very good performance in years ending with the number 5 (e.g. 1975, 1985 or 1995). Their average profit amounted to 34.61%. That equals half of the average profit for the entire decade! There were no losing years. On the other hand with years ending in 7 there were often price slumps.

More details at the source: http://www.seasonalcharts.com/zyklen_dekad.html

Stating the obvious here: Obama is proposing to raise the taxes, particularly on investment capital gains and dividends. If enough people believe Obama (barf) is going to win, and McCain (barf) is going to lose, there may be a lot of stock selling just to lock in the lower tax rate on cap. gains.

S&P 500 Price-to-Earnings ratio is climbing as more 2nd quarter earnings results are being announced.

Click to enlarge

This is a re-post of an active commenter from The Big Picture blog.

“I believe there is serious misconception about what is occuring and what will occur. First and foremost, the threat forward going is not inflation or stagflation - it is deflation.

Although it is true that inflation has been understated, the cause of the inflation has been poorly analyzed. Compare M1 to M3 and you readily see that this is not monetized inflation but debt-expansion inflation.

Debt acts just like money to a point - and that point is insolvency. Debt will say that my CDO is worth $1.00, but insolvency shows that the market values my CDO at $0.27. What happened to the inflation within the CDO? It evaporated, as all mirage capital must eventually disappear.

Debt said my house was worth $500,000. Insolvency and debt contraction says it is worth $400,000 or less.

Debt said all those casinos being built in Las Vegas were worth millions, that New York office buildings could support negative cash flows, and that that copper was worth an all-time high.

False perspective can drive a false demand, leading to a bubble - a bubble being that portion of the price of an asset that is simply driven by debt - i.e., Ponzi fincance. Anyone remember 1973 and 1974 when we perceived an oil shortage when none had occured? Or when all those builders paid premium prices for undeveloped land because low interest rates had caused an artificial demand for housing?

Misallocation of assets. That is what has occured. The decoupling of the world is an illusion - serious recession in the U.S. would lead to world recession, and all those high-flying commodity prices would come tumbling down along with it.

Debt contraction is a deflationary event, and it is the threat of deflation that is propelling the Fed to slash rates - which they will continue to do until we reach a real negative interest rate.”

Posted by: Winston Munn | Jan 17, 2008 9:29:37 PM

Notice, it was written in January of this year. I’m not seeing much deflation yet, but maybe I’m looking in all the wrong places?