Ian Woodward's Investing Blog

As angry as Main Street are they will be a lot angrier if Congress does not act.  It didn’t take long before the finger pointing started after the Bill failed to pass.  The sadness is there will now be spillover to every American, rich or poor, which has already suffered from the experience of the crash of 1987 or the dot.com bubble bursting from 2000 to 2002.  Their hard earned 401K’s have shrunk overnight and it will be years before they recoup that portion of their nest egg which took hard work over years of faithful due diligence to their companies and their families.  Some may be unfortunate to find they have to postpone their intended retirement or go back to work as a result of this debacle.

It is little consolation to say “Been there, done that” when I think back to that fateful day in 1987.  By the looks of things this could be worse, as tomorrow is the last day of the month and of the quarter, and Congress cannot do anything until Thursday.

I have no words of wisdom that I haven’t covered, especially these last few weeks.  In times like these “Cash is King”, but make sure that your money is FDIC Insured in the Bank and that if you have >$100K in the account that it is registered with the Bank as a Trust and that you and your dependents add up to the multiple of $100K that is in the account.  For example, suppose you have $320K in the bank just to pick a number, and you and your wife have named two dependents in the trust; that provides $400K worth of coverage for you, so you are covered.  You should talk to your Bank Manager to make sure your money is safe.

Best regards, Ian.

3 Responses to “Wall Street Reacts to a Day in the Life of Congress!”

• 1. Hal P. Says:
  September 26th, 2008 at 9:01 am

LOL That was very interesting. It’s amazing to me really that the market is so emotional. But it is what it is.

• 2. Stock Research Says:
  September 27th, 2008 at 8:14 am

Ian, I don’t disagree with your assessment that things will get worse before they get better, but I think that, all things considered, it is good that the market has not over-reacted to the ongoing bad news and uncertainty. I think most of us agree that a measure of debate is good, rather than writing a $700B check with no questions asked.

• 3. ian Says:
  September 27th, 2008 at 10:06 am

Hi Steve: I couldn’t agree with you more. I suppose what triggered your comment is my last sentence on “pussy-footing” as my concern at the time was for an over-reaction by the markets ala 1929 and 1987, which fortunately for us all has not occurred so far. I certainly didn’t mean to imply that they write a blank check, and I am glad to see the subsequent urgency on all fronts to bring closure to a joint solution. I also agree a measure of debate is healthy, and as things have since unfolded there has been sufficient due diligence to buoy the market up from precipitous consequences. If “floodgate” action is avoided we will all be happy until the next time. My emphasis was on the “degree of a sense of urgency”, nothing else.

I have made it a principle of mine not to bring politics into the discussion on this blog, but as I have always maintained, one important aspect of Investing is to understand the reaction of the Stock Market to the action or inaction that the FOMC takes. If you take the time to look at past blog notes of mine, you will see that is the emphasis I apply. That is why I take the time on occasions like this to share five hours of my efforts just catching that reaction, leave alone the additional time to write the blog.

My question of you and the audience is “Was this particular blog note of value to understanding the reaction of the market to important FOMC, Administration and Congressional discussions in helping you be a better student of Investing?”

Best regards, Ian.

Today’s discussion by the Three Musketeers, Secy. Paulson, Fed Chairman Bernanke and SEC Secy. Cox at Capitol Hill was a battle between Wall Street vs Main Street.  It goes without saying that the senators questioning and of course posturing was to make sure that the Tax-Payers’ concerns were being heard, since we will ultimately be footing the bill.  However it was abundantly clear to me that what was originally expected to be a quick passage of the $700 Billion Bill was not likely and as you will see so did Wall Street by the end of the day.  The DOW and Nasdaq closed down another whopping 162 and 26 points, respectively, and so we drift along teetering on the brink of disaster.  Net-net, while Rome burns, Congressmen Fiddle!

I captured the highlights of the action on a timeline relating to the ebb and flow of the DOW during the course of the hearings, and here are the various snippets from the Administration, Congress and the CNBC commentators in the first two hours in the morning:

…And here are the next 2&1/2 hours:

Here is a picture of the internals of the market which showed how these indicators reacted during the five hours I kept an eye on this.

The only saving grace is that volume was low which signaled a wait and see attitude by Wall Street.

I submit that another day or two of this pussy-footing will see us on the road to the floodgates all opening to the downside as I forecasted yesterday.  Hang on to your hats for a bumpy ride.

Best Regards, Ian.

Editor’s Note!  Please read important discussion in the Comments section of this note to understand the context in which it was written.

I have updated this Blog Caption since I wrote the March 9^th blog over six months ago and that time I did full treatment to using the Limbo Bar (the reverse of the High Jump) to take stock of where we stood relative to 2001.  I’m sorry to express gloom and doom, but if today’s discussions between the Administration and the pussy-footing Congress are anything to go by, that is precisely where we are headed.

As I showed in the March 9^th Blog which asks “Where are we Headed #2?” , I gave full treatment to how I use the High Jump and Limbo Bar to take stock of where we are and where we might be headed.  It’s sad to say that History does repeat itself and what I said might happen has come to pass six months later when I felt we could be headed for a Recession.  Today’s action by the Stock Market is a warning sign that if the talking heads in Congress don’t stop yapping and do something quickly, we will all be up the creek without a paddle, including them.

Forget Bounce Plays and Follow Through Days (FTD’s) for a moment until we see some action from Congress.  What is important now is for me to remind you in four simple pictures of the Value I place on the High Jump and Limbo Bar at times like these to anticipate where we could be headed. 

1. It starts with a slide I used in the October 2007 Seminar where I first posed the thought that we could be headed down to 1150 on the S&P 500. I have shown that several times before in other discussions and in my most recent blog of a few days ago.
2. We then fast forward six months to the March 9 Blog and the March 2008 Seminar to see the status then and the potential place we could end up in two slides from that blog.
3. Now we can take note of the critical Line in the Sand we are at with the Limbo Bar having crossed the “Lower” Target of -15% down from the S&P 500 Index, and where we could end up at -25% down if the flood gates should open due to dilly-dallying by the powers that be.

Of course, if they save the day, we only breathe for a while longer before the next debacle in the Financial System unfolds.  We will be reviewing these charts at the Seminar in October:

The above chart was in the March 9^th, 2008 Blog…Sad to say we are at 1208 right now.

I’m not suggesting that we head down to 800 on the S&P 500 any time soon, but the odds of 1150 is now almost a certainty and again, if we see any signs of bickering in Congress we are headed for 1000 and possibly lower.

Best Regards, Ian.

This is a “You Will Recall” blog that summarizes one year of History:

It finally happened and it isn’t over yet…Capitulation big time!

I’m sure you recall the Thick Blue Pencil Line Chart…it was posted exactly seven months ago as a possible worst case scenario at that time.

That didn’t come out of thin air – there was a Plan set a year ago:

Read the September 20^th Blog – Ignore the Fog and Follow the Signposts

I said at the time “Here is a one page plan that slices and dices the market six different ways, four of which are Technical, one Fundamental and one Folklore, all of which are self evident to the reader.  It is in essence a ready-reckoner that gives you insight to the different Road Scenarios, and shows where the recent Gun Fight between the Bulls and the Bears took place.  Your job is to know which side is winning and act accordingly.  Enjoy!”

 Now the only thing to do is stay in your Foxhole:

…And that is the heart of HGS Investing in four quick snapshots.

 In Good times and in Bad, “Try it you’ll like it; otherwise take two Alka Selsa”   

Best Regards, Ian.