Picopost: Bear Stearns Shares Off 40% on Fed Bailout News

[solarbird]

Is the market seriously telling me traders had actually believed all the "everything is fine here" bullshit?

Apparently, it is.

Wow.

ETA: Marketwatch links to their First Take with the text, "Bailout shatters trust." If that's true and people have been believing all these pretendings and lies and now the shingles are off, then OMG we're in for a ride down now.

Comments

[elfs.livejournal.com]

The alternative to not maintaining a common illusion of wellness is to look at it head-on and watch it all collapse out from underneath. Of course the market has been in a state of denial.

The principle problem comes from overvaluation of a commodity product that is not easily enlargeable: there's only so much real estate on the planet that people really want. On the other hand, the real estate isn't going to go away, either. All other segments of the market, from food to media, continue to hum along. As the fed is fond of saying, agricultural and industrial market segments are sound. So it's hard to what's really wrong.

We'll see now, I think.

[solarbird]

I don't know if you've noticed, but consumer spending is not healthy. And that's 70% of GDP.

[dustin-00.livejournal.com]

Hmmm.. should I move all my IRA/401K investments to "cash" now?

[solarbird]

Why? If you're confident of a market dip, why not sit it out in, say, T-bills, then jump back in when you think the coast is clear?

I mean, sure, you don't want to have to go nuts with your 401(k) and obsess about it constantly. Who has time for that? But if you know you're in a bear market, why not engage in a little wealth preservation during bad times?

A little bit down in this post, there is a description of a very simple bull/bear market detector that has very little whipsaw and only requires checking up on things every couple of weeks or so. Just as example. Why wouldn't you do something like that?

[solarbird]

I am not a financial advisor and this is not financial advice.

That said, cash as in take the withdrawal penalty and stick it under your mattress? Certainly not what I would do. People are starting to raid their 401(k)s to avoid bankruptcy. This is the worst idea possible as that's the only thing they can't take away from you no matter what.

That doesn't mean you might not want to re-sort your investment decisions. For example, I went 100% to treasuries in December. Sure, the return is lousy - 2% or so - but that's hella better than the 20% loss I'd have taken otherwise.

A little bit down in this post over at Market Ticker, there is a description of a very simple bull/bear market detector that has very little whipsaw and only requires checking up on things every couple of weeks or so. It's easy and has historically been fairly reliable. I link to it because you might find it interesting.