“Never make predictions, especially about the future.” — Casey Stengel
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Under no circumstances should any of the content discussed on this podcast be considered investment advice.
Since last week’s podcast, a lot has happened: earthquakes, a tsunami, and nuclear chaos. The VIX index (the volatility index) has skyrocketed – we can continue to expect plenty of volatility in the upcoming weeks. Tuesday the market was down 200 points; we saw the same on Wednesday, Thursday the market was up 160.
Strap on your seat-belts, get ready for plenty of volatility.
As a reminder to our regular listeners and to inform our newer listeners: the media makes money by selling advertising. Because of this, the news tends to be more sensational in an attempt to keep you watching (or reading).
We have been saying for a while the market has been over-bought and in need of a pullback. What’s happening now in the market is…not a surprise. The long term charts are still positive. Although it’s been rough, what we’re going through now may ultimately just be a correction, and not a re-run of 2008.
The thing that really gets me is we can spend months watching the market climb up inch by inch, only to give it all back in a week’s time.
The downside tends to happen a lot faster than the upside.
The biggest difference between now and 2008 is this: In late 2007, the relative strength chart measuring “cash vs. the stock market” actually flipped over, and started to favor cash.
Look, this chart doesn’t change like very often, so when it does flip over, it is a very big deal.
This chart answers the question, “which is currently stronger?” Putting money into cash, or putting money into the stock market? This is why we prefer to focus on what is happening now – instead of trying to predict what will happen next. Like we said last week, the big picture backdrop is still positive, but the short term is very, very sloppy.
Let’s take a side-bar and talk about the events in Japan in the last week:
1. Terrible 9.0 Earthquake
2. A 30-foot Tsunami Wave
3. Nuclear Reactor “issues”
I’m stunned at the political posturing and rhetoric thrown around regarding nuclear power here in the United States.
Let’s be clear: this nuclear power station has been online for 40 years and survived a 9.0 earthquake. The station was still working after the earthquake – it was the tsunami that knocked out the power.
Are any of the nuclear power plants in the US in danger of being hit by a tsunami? I don’t believe so.
But you won’t hear that on the news. As usual, the media drums up emotions.
It is this reason why we rely on point and figure charts when managing your money here at Mullooly Asset Management. These charts do not show any events, or points where you can add in emotion. Emotion is an ingredient you don’t need in this recipe.
These charts simply show the ongoing relationship between supply and demand. And again, that’s not a theory- it’s an economic law.
The Mullooly Asset Management Podcast can be found below. The Podcast can also be found on iTunes. Go to the iTunes Store and simply search for “mullooly.” Under no circumstances should the information contained in this blog or podcast be considered investment advice.
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Managing Money in 2012: What Investors Need
by Thomas Mullooly on January 3, 2012
I have been helping individuals manage their money for over twenty five years.
Actually longer — if you count the days I spent with EF Hutton, before becoming a licensed stockbroker. I have seen everything, so I will not recount the glory days and the gory days here.
We all have our war stories.
Along the way, I learned how making investment decisions based on news can really kill your portfolio. I have employed point and figure analysis to help manage money for my clients since 1997. The beauty of these charts, if you have followed my work, is they cut through all the noise we hear (and read) on a daily basis. All you see on point and figure charts are columns of X’s going up, and columns of O’s going down. The patterns they form point us into the right choices.
No doubt, 2012 will give us some serious headlines. News that will make us want to vomit, and news that will make us scratch our heads.
And only then most folks TRY to figure out HOW this news will affect their investments. Yikes.
Over the weekend, I saw a very famous photo, courtesy of www.championsgallery.com.
It immediately struck me: this is what we ALL need to successfully navigate 2012.
Look at the photo, below:
Managing Money Needs Focus
I want you to look at something in this photo: even though Secretariat was THIRTY ONE LENGTHS in front of the competition…
Notice the blinders.
Notice the eyes.
Forward.
I’ll say it again: 2012 will bring some gut-wrenching news. The beauty of point and figure charting is these charts cut through all the noise we hear (and read) on a daily basis. Point and Figure keeps our blinders on, and keeps our eyes focused straight ahead. Not on some far-off dream like they preach at the big firms (“ya gotta be long term”). All you see on point and figure charts are columns of X’s going up, and columns of O’s going down. The patterns they form, point us toward the right choices.
Point and Figure charts have been pointing people in the right direction since they were created over one hundred years ago, in the 1880′s. These charts do NOT follow the news. They follow the ultimate indicator: prices. News often breaks well after people have placed their bets. In other words, charts will begin moving up (or down) well BEFORE the news is learned. By the time they are talking about it on TV, it is too late.
We remain focused on what is happening in the market, and what is happening with your investments in particular. We are keeping the blinders on, vowing NOT to be distracted.
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