My concerns and strategies of the S&P these days

Week Aug 12th:

In the past days, the US markets has been experiencing a medium size correction.  Markets have topped in around August 2nd with the S&P at 1709.  The S&P is expected to drop around 10%, but we can't tell for sure if this will happen at exactly 10%.  It may be 6, 8, 10, 12, or 14%.  So, the average is 10%.  

Since late July, i have been all cash with my 401k and brokerage account.  I'm waiting for the markets to bottom at around 8% and i'll start buying.  But, one thing worries me.  In May 6 of 2009, the markets when down around 6 to 8% in 1 day.  The drop was part of a major correction called Major wave 2.  This summer, we are experieincing a Major 4 correction.  We are only at the beginning with 3% already down.  I'm going to take the risk and start buying at 1580 and below.  Because, i think this is how deep we'll go.  Or more? 

Week Aug 19th:

I bought some longs on Monday as i think the S&P will bounce a bit upward.  Today, my UPRO and SPXL gave me a 1.2%.  In my 401k, i'd bought Goldman Sach's Small Cap Value.  I should have around 1.5% gains by tomorrow.  I'm only invested around 20% all together as this bounce will be short lived.  After that, we should continue the decline and i'll be ready with my short positions.

My trading strategy and gains:

401k = 16.3% up YTD (33% invested on small caps).  Projection by end of year is 24%
Brokerage = 18% up YTD (15% invested on triple long ETFs)  Projection by end of year is 28%

401k

I talked to a friend last night (I won't say his name for privacy purposes), but we talked about how to allocate a 401k.  The best way to allocate a 401k is to spread your investments in all allocations.  I allocate my 401k differently because i've done this for several years already and i'm familiar with the changes and trends of the US markets.  But, if you are just getting started it you should start with a different approach.  You should "diversify".  It is written on every book about investing and any financial adviser will tell you the same.  When you diversify, you are spreading your investments on safe and risk accounts.  A typical 401k breaks down like this:

Safer: Money Market Accounts:

Safer with little risk: Bonds, Fixed, Mortgage

Medium: Balanced allocations, Large Caps

High: Small Caps

Higher risk: International, Emerging markets

So, you need to spread them out on all of them.  You will make and loose money, but that's how you start.  You will never make money without loosing.  I had a -2% on one of my accounts YTD one time.  This year i have 20% YTD already on that same account.  I've watched my 401k account since, who knows 2001 i think.  I've seen my account in ups and downs many times.  But no more.  After all this years, i can manage to get positive gains YTD.  Last year, i got around 13% YTD on my 401k.  This year is up 16.5% YTD.  My plan this year is to pull a 30% + if possible on my 401k.  We'll see.  I will post more stuff later and how to do it.  Because, know one will tell you when you should take your money out or put you money in when the US rocks or goes to recession.  Did anyone tell you when to sell your house before the housing market broke down in 2008-2009?   

Let me suggest some stuff to get you started.  I had read them and i recommend them to you.

Real Money by Jim Cramer

5 Waves to Financial Freedom by Ramki Ramakrishnan

Read your 401k allocations and call them.  It's free to talk to your 401k advisers.  

Watch Mad Money

Will post more stuff later.  

401k's and Brokerage Accounts

Well, i'm pretty happy today.  I sold all my ETFs (Exchange Traded Funds) and got a 17% gain in a 2 to 3 weeks period.  Really amazing stuff!

Back in late June, i bought the UPRO, SPXL and TQQQ.  They are 3 times bull S&P ETFs.  This means that if the S&P (and if you read my previous comments about what the S&P stands for) went up 6% in 2 to 3 weeks, you make 3 times of that percentage.  It is one of the riskiest investment strategies out there because if it turns against you, you'll want to pull your hair out and cry.   So, I sold these shares today and got a nice profit of 17%.  Now i'm watching the after market data after Ben Bernanke's speech and the markets are rocking again!  I got so close to stay in but i did sale my shares because you can't get too greedy in this game.  You get too greedy and you can loose some.

Now, let's talk about some of the beauties of investing:  401k and brokerage accounts.

Brokerage accounts: They are your best "checking account" if you are an investor or future investor.  Forget the damn checking accounts and savings accounts at the banks..  They are a bunch of scheme accounts from the banks and other institutions promising a misserable .0001 % rate of return.  Set up an brokerage account!  This is what i can do with my account and just found out a few months ago.  You can put money there, let's say 10k and they'll match 100% if i want to borrow money at a 4% APR to invest!  Is that nice?  How much is a credit card APR's?  15, 20, i heard of 27%.  Now, you can't take that matching 100% to spend but you can take your own cash out, let's say 5k and you will still have 10k all together with the left over 5k + the matching 100% = 10k still invested.

401k:  You get exposure to many allocations:  bonds, mortgage, small caps, large caps, international, Europe, Asia and many more.  If you think China is going to rule the world, you buy International Emerging Markets allocations (see you company's 401k).  If you think US will keep rocking, you buy large and small caps.  Now, one of the best freebies from a 401k is your companies match to your investment contribution per year.  Free money!!  I get a 25% match.  There are other lucky ones with an 100% match.

I'm invested on both brokerage and 401k accounts.  You should give it a try.  They are great tools to have and start as early as possible.  It takes some years to get this stuff.  First strategies are to be diversified in your 401k accounts and playing it safe.  Once you start getting the hang of it, you can try the brokerage accounts.

Oh, and by the way, Virginia 529 sucks.  You can only move your money once a year!!!  The tax incentive is not that great than that of 401ks with the ability of moving your allocations more times per week, or month.    My 401k is with Principal and it let's me buy and sell once per day.  Oh i forget!  If you are a first time home buyer : ) use that honey to buy a house!  Free of tax penalty!  Unless the government changed this rule.   : )

Laters.
P.

Will the US go in to recession again?

Will we go in recession again?  This is a question many wonder if a recession is likely to come again.  Well.  The answer is yes!  

Last week, i went to my friend's Vic house for a bbq and over a couple of drinks the question came up.  I want to clarify how i think a recession will come and when (or better in what time frame i expect this to happen).

Historically, the US economy has had many ups and downs (recessions).  Look it up and you'll see that in the last century, the US economy or the US markets, have gone through more than 8 or 10 recessions if i'm not mistaken.  Every time before we went to a recession, a number or 3 to 6 years of good strong years in the US markets have taken place.  We are currently in a 4th year of strong US market upside.  Yes!!  Believe it or not!  Strong US market and somehow stronger economy.  Why? How? Well, is all about injecting money to the economy.  Yes! Making money out of thing air and put in it to work.  The FED invest or buys bonds and mortgage securities when the markets are low (cheap).  Once this happens, smart money people or entities (hedge funds, big companies with money = Wall Street) do the same.  They buy and invest in markets and markets go up.  Then, after things get better, the individual investor (Main Street) puts money in.  

Now, what happens after the FED's stops putting money?  What happens when Wall Street and Main Street stop and pull their piggy banks out.  The answer is: fear is on.  Everyone pulls their money out and a "top" on the markets (long term speaking) is called.  

Unfortunately, once this "top" is in, the regular investor, the public, and most people won't know this.  After a number of 3 to 12 months, a recession "the bottom" is reclaimed.  Historically, and as far as i remember, recessions have lasted 9 to 18 months.  The Great Recession of 2008 to 2009 lasted almost past 2 years!  

So, based on what i said and with my resources - and we can call it guessing too : ), the US markets or US economy will bubble up and pop by late 2013 through mid 2014.  The decline will last again either 9 through 18 months and the financial mongers will start come out of their holes claiming that the US is going down and China will take over the world hahaha.  

So, the new recession will be called in 2014 through 2015.  There it is!  If i'm right, you'all better send me a check for my commissions or for saving you money : )  The FED will stop pumping money soon, housing will react and go sideways (we hope), smart money investing (Walls Street) will take out their money in order to cash out and celebrate all these 4 years of money making and the regular public, consumer spending, discretionary spending, consumer sentiment will drop.  

Just remember this: what ever goes up, must come down.

But, no worries!! after 2015 or 2016, United States will rally and kick ass like a champ for many years.  Then, we will start a new era where people will want to come to live the American dream again.

I'll explain how this may happen later.  Just a hint:  Energy boom.  The new United States of Oil and Energy of America (i hope too)

Pepe

-- This is Market Analysis, not a recommendation.

My Comments of this Recent Market Week at a public blog

1. JosephApril 13, 2013 at 11:09 PM

   OK. I missed calculated the top and lost half of my ytd gains by trying to short the markets. For the meantime, this event has tought me that shorting against a bull market and calling a top is too risky since they are 2 powerful forces you should not bet against when they are together. For now, I'm going to sit on the side and be patient and disciplined. I will wait for the next intermediate bottom and buy in increments as the markets decline. Buy the dips. I will then wait for the markets to rally and make lots of gains as I will be buying triple etf funds to ride the way up the hill in May. In the markets, the only way to make money is by making decisions with probabilities. And now I fully agree with the saying that the trend is your friend.

   Reply
2. 
   NaqviApril 13, 2013 at 11:59 PM

   Hey Joseph. Good comment. Trend is the only friend one should have in this market. Market tends to deceive the majority with its cunning ways. However, if you trade with the trend you are more likely to get bailed out on a wrong entry vs if you enter against the trend.
   
   However, always keep in mind that any counter-trend move can turn into a new trend or new bear market, under the right circumstances. In other words, when majority of investors get confortable with a direction of trend, it reverses. Therefore, one should keep this possibility in mind.

   Reply
3. 
   JosephApril 14, 2013 at 12:55 PM

   I agree. But, it's a risk I'm willing to take. It is the probability of the us markets topping and bottoming at the intermediate term level. And with the probability that spx will reach 1650 or more by the end of this year.

Standard and Poor US index

Well.  This time i'll write in english.  And pardon me for my grammar : )  (like the song form Incubus "Pardon me while i burst"?  I think this is what they say :)  Anyway, its just late and i don't know what i'm saying.  haha.

Let's talk US market stuff.  I follow the Standard and Poor index everyday.  And i have followed it for the past 5 to 6 years.  Every year i read and analyze more and more about it.  The S&P market index is one of the most followed index in the world.  It's a combination of 500 mostly US companies that have a lot of exposure to the american consumer.  And some international too.  When ever the american consumer spends money, the S&P 500 makes some gains very often.  If you were going to go back and search some stats of the S&P, you would notice the S&P rallied several times during the Christmas seasons.  Why? because it is the time of the year where most people spend money to buy gifts and others.  

So, now you get an idea of what the S&P is but you can always google it.  At this time, what I am doing is researching for other seasonal and historical moments of the S&P tops and bottoms, moves to the upside and downside, crashes and other behaviors of this index.  Yes, behavior.  The S&P moves accordingly to human investor psychology.  Not the human psychology, but the human investor psychology.  It is very interesting what i found and i will share this with you all sometime.

P. 

Bolsa de Venezuela

El presidente Chavez fallecio ayer como ya lo deben de saber.  Bueno, no le deseo mala suerte o que mal por el, pero si que jodio mucho a su pais.  Lei un articulo en CNN que desde que Chavez anuncio su enfermedad del cancer en 2011 el stock market de Venenuela subio como cohete hasta ahora.  Subio 300% en solo este corto tiempo.  No suena nada mal.  Cada vez que se escuchaba malas noticias de Chavez parece que la bolsa de valores de Caracas aumentaba en valor.  Lamemtablemente, como extranjeros que somos no podiamos invertir ahi.  No que yo fuera a invertir pero como hubiera sido...  hmm. 300% wow!!  Estaria pasandola en alguna playita con la family.  http://money.cnn.com/2013/03/06/investing/venezuela-stock-market-chavez/index.html?iid=HP_LN

P

For english plesase use google translate