Bill, when you use RSI as a technical reference to identify entry and exist points, do you put economic and overall market context into consideration? I found I am often scared by that when the candidates fall into the accumulation area.
Thanks for the comments.

Many readers and contributors may have seen the following already. I send the link for the others. Just another piece of support for what Bill has been saying for months:

Coming recession will be nastier than 2001's, economist says

http://www.marketwatch.com/News/Story/9mQrL6tbQK62XTQ1VjX5zm9?siteid=mktw&dist=TNMostRead

Thank you twoeagles. Anyone knows this Mr. Roubini? (he was called the eternal Eeyore and the article seems to have been posted Aug 23, it had no effect on the markets).

This was posted there:

"But the bad news is that falling car sales is one of the strongest indicators of recession.
According to the indicator, if sales by new-car dealers are down by 2 percent or more over 12 months, compared to the 12 previous months and adjusted for inflation, then a recession is either underway or set to begin within a few months. And the figure stood at minus 2.4 percent when June sales figures were released by the Census Bureau.

The indicator has correctly called five recessions since 1968, and has never warned of a recession that did not occur, according to an analysis by The New York Times. "

Is this true?

Ursus, Dr. Roubini is a professor at New York University's Stern School of Business. This link will give you more information about him.

http://pages.stern.nyu.edu/~nroubini/

I've heard Dr. Roubini interviewed on Bloomberg Radio. His case is compelling.

Mr. Cara, the difference between you and the other pundits is that you know what you're talking about. Thank you for creating, supporting and sponsoring this blog and telling us what you know. You're retired, after all :)

Bill
I am new to your site but not new to the financial services business. Thank for all you do
through your blog/website.

It has been argued by some knowledgeable sources that the swoon in the equity markets in May was directly tied to the rather abrupt shrinking in global liquidty engineered by the BOJ(ECB and Fed helping too) . All higher risk transactions by hedge funds etc. got liquidated, resulting in a temporary decline in the equity markets globally.
I do understand that your focus is primarily technical not fundamental.

Would appreciate your view.

mano

There are more and more Harley Davidson s being brought up to Canada each week, no stats, just my observations of the auto trader as i am in the market for one, thanks Bill. In talking with the sales agents apparently most of these are bank repos. The difference in the dollars has brought these bikes down 3 to 5 k over the last couple of so years, could Canadians be buying at par in a year or so ?

"Recession - Economics. a period of an economic contraction, sometimes limited in scope or duration."

Folks,

We ARE in a recession! Housing sector (and related sub-sectors) is in contraction; Automobile sector and related sub-sectors)is in contraction; Consumer spending is in contraction, etc., (i.e. follow the numbers). We are in a recession.

However, those individuals who remained debt-free, or have limited debt liabilities, and are life long, habitual savers, SHALL recover relatively unscathed (we have historical precedence backing this prediction).

Oratier said:

"We ARE in a recession! Housing sector (and related sub-sectors) is in contraction ..."

Well, to comment on your thoughts, the economy is certainly contracting. But some economists define a recession as 2 or more quarters of negative GDP growth. By that standard the economy is not technically in recession at this time.

I agree that the U.S. economy is in a period of declining growth - however you want to measure it. It just remains to be seen if it turns out to be a soft landing or worse.

I found this link to be helpful.

http://economics.about.com/cs/businesscycles/a/depressions.htm

Todd,

Thanks,

The link is helpful

I think I perfer... Recession: The BCDC Definition

Mano,

I believe what you are referring to is the ending of the "carry trade". Hedge funds have been borrowing at extremely low rates via Japan (ultra low rates) and then taking that money and investing in other areas. A simple trade would be to buy US Treasuries and pocket the difference in the interest rates. With the use of leverage, this trade would bring in excellent returns. With BOJ / Central Bank interest rates moving, this trade started to unwind and the hedge fund purchases were sold. So in a way, yes, that is what happened and if memory serves me right, Bill has indeed mentioned this in the past (Bill, please correct me if I am wrong). I have simplified this in the hope of newbies getting caught up with your discussion. I think you already understood the "carry trade".

The reason that I have chosen to answer your question to Bill is twofold. First, to save Bill some time, he is busy this weekend. Second, to say that Bill's focus is NOT primarily technical, but is a combination of technical and fundamental analysis. He calls it his "cause and effect paradigm". Being new to his site, you may want to read every tab at the top. Being in the business, you will be amazed at what you will pull from it. Also, do a search on "cause and effect paradigm" if he doesn't mention it in the individual tabs. Please let us know what you think!

Good trading!

g034

g034 - Thanks for your help.

Gemma

Merrill Lynch lowered their estimates this past week, expecting the next GDP report to come in under 2%.

Companies with cash are buying back stock vs investing in growth.

Autos are slashing production for 2007.

Surplus oil went from 22% in the past few yrs to single digits recently. there is not enough supply to keep up with worldwide demand. this is a fact.

Majority of consumer stocks reported dissapointing earnings. Companies that suprised to the upside were the exception, not the rule.

Housing, nuff said.

Consumer confidence is low.

Trust in the U.S govt, mainly the war and Bush is low.

New terror threats are abound.

The only bright spot here is employee productivity and football season is almost here.

It sure smells like a recession to me.

Bill,

I think it depends on how one buys and holds. As per your example, chasing performance often leads to buying at the top (and holding all the way down). It's obviously not a good way to do it.

If one follows the David Swensen buys and holds approach, one can be quite successful http://www.yalealumnimagazine.com/issues/2005_07/swensen.html

http://www.onpointradio.org/shows/2005/09/20050913_b_main.asp

Teresa

Teresa,

With all due respect, I can't figure out what David Swenson has to do with "buy and hold". As far as I know, he is an asset allocator who's outperformance to his peers has been due to a higher percentage of total fund assets in absolute return strategy hedge fund managers who have had excellent returns over the years. Managers who are accessible only to very large clients that meet the minimum requirements (not the majority of readers of this site), btw.

Thanks to Crestmont research, here is a link to a long term chart that clearly shows that performance for buy and hold has historically been due to when you bought. Obviously, if you bought at market peaks (like Bill is implying) performance has been poor. As you said; "chasing performance often leads to buying at the top (and holding all the way down). It's obviously not a good way to do it".

http://www.crestmontresearch.com/pdfs/Stock%20Secular%20Explained.pdf

So, please explain how Swenson's approach to buy and hold can help the reader of this site.

Thanks,

g034

Swensen's book shows readers how to construct a portfolio with core asset classes. While he instructs readers to rebalance, the fact is that they are always long.

You may not consider Swensen's approach to be a "buy and hold" strategy, but since there is no active management involved, it can be considered to be a more intelligent version since it eliminates the possibility of performance chasing.

As for why Swensen's indexing strategy will likely beat the vast majority of "active investors", the best explanation is by way of www.indexinvestor.com

Start with http://indexinvestor.com/Free/actPass.php

Anyway, all this matters not since you believe that the bulk of his returns come from hedge fund exposure.

Teresa,

Thanks.

g034