Stop Waiting for the Crash; Use a Regular Investment Plan

7/15 - "Actions continue to speak louder than words. For all this talk about "inflation", the Fed sure is not concerned much about it...Bernanke has an ongoing alphabet soup of credit lending facilities and has extended the Primary Dealer Credit Facility to next year...The market has now forced Bernanke to walk away from his ridiculous June assessment that threats to the downside have diminished somewhat."

"Bernanke continues to have no vision. He is stuck with his academic models that suggest it is possible to spend ones way out of a recession. It is impossible. Unwarranted spending is particularly dangerous at this juncture. Capital that could and should go to more productive uses, is instead diverted to more malign investments or personal consumption."

"Somehow Bernanke believes that housing and the economy will pick up in 2009. The question remains "Is he that dense or is that just what he is saying?"...Bernanke did not mention a thing about the impending commercial real estate bust...There is a rising glut of vacancies and downward pressure on rents. Regional banks that escaped the housing debacle instead foolishly undertook commercial real estate bets."

"There was not a single peep out of Bernanke about money supply. In fact the word "money" did not appear at all in his testimony...How can you have any reasonable economic policy when the chairman is scared half to death to discuss interest rates and money supply?...Here is a summary of Bernanke's testimony in one word: "Hogwash"."

7/16 - "Going back to one of my themes, be wary of companies that sell their best assets to bail out their worst assets. Tonight’s poster child is GM. How to get cash? Borrow against the remainder of GMAC, foreign subsidiaries (most promising part of the corporation), etc. Not a promising strategy. As I have said many times before GM common is an eventual zero. Same for Ford."

"One to think about: if US Bancorp is having a bad time of it, shouldn’t most large banks be having a worse time of it? I spent a little time this evening reviewing the prices of junior debt securities of marginally investment grade banks (and a few mutual insurers, also). The pressure on marginal financial institutions bearing credit risk is huge."

"Speaking of junior debt securities, Moody’s gave the GSEs, and the US Government a shot across the bow when it downgraded the preferred stock ratings of Fannie and Freddie. With the fall in the common and preferred stock prices, any possiblity of private capital raising fades. The Administration and Congress should realize that whatever flexibility/help they grant the GSEs will be taken, and quickly. Budget for the worst case scenario...Then again, Ackman’s plan to restructure the GSEs, which is similar to mine (given in the last week), is reasonable. Leverage is reduced and a market panic is avoided."

"Looking over some of my indicators, it looks like we are close to a bounce. It feels a lot like January of 2008. So, is it time to buy? I’m not sure, but I am adding little by little to my stockholdings. I’m probably going to up the equity percentage in some of my accounts..."

7/15 - "There are two rules that every investor should abide by not only in volatile markets, but in any type of market: (1) Keep your losses small and cut your losses early and (2) Let your profitable investments ride. So why is it so difficult for the average investor to abide by these rules? With so much information so easily accessible today, the internet was supposed to level the playing field between the big boys and the small retail investor. It has, but conversely and unfortunately, it has also provided a medium for the big boys to mercilessly manipulate the inexperienced retail investor into making poor investment decisions as well. When you consider the vast ocean of information out there, at first glance, the task of sorting the very few gems of good information from the mountains of rubbish appears to be a daunting, nearly hopeless task."

"Find someone (or a few people) that has a track record of being correct almost all the time and follow him or her (or them) and ignore everyone else. Yes, the majority of people labeled as experts in the media and quoted most of the time in newspapers and TV are wrong the majority of the time. It’s not because these people are dumb. It’s because they have an agenda – they work for the big commercial investment industry machine in the sky and their singular purpose in life is to get you to buy any investment product they sell, whether or not such an action will jeopardize your financial future."

"Lastly, there is one other horrible by-product of the political-investment complex of demagogues – hope. Yes, hope in the investment world, can be an extremely destructive concept, especially during a bear market. It is hope that turns a 20% portfolio loss into a 40% portfolio loss and a 40% portfolio loss into a 60% portfolio loss. Those in the investment world that have a narrow agenda to “sell you” will always provide you with a sliver of hope to “hang on”, despite the fact that you may have already suffered 20% to 40% losses over the past 12 months. They know that the greatest psychological weapon they can use against the retail investor is his or her ego. People hate admitting that they are wrong, and will grasp at anything that provides them hope that they aren’t wrong."

"So use the proper filters and combine your newly found higher level of understanding of the global economy with these two rules: (1) Keep your losses small and cut your losses early and (2) Let your profitable investments ride. However, rule (2) only applies during bull markets, not bear markets. If you’ve been suffering losses throughout 2008, I guarantee you the application of this previous sentence will start turning your losses into profits."

7/15 - "The fact that the market is looking increasingly "crash-prone" is indeed old news. Just take a look at virtually any financial sector, and in particular, the banking index ($BKX), and you could argue that we have already seen a crash or two. That said, whether you agree with the government's recent actions or not, one of the more frightening "crashes" that we are witnessing could well be the ongoing debasement in the U.S. Dollar."

"...we (the U.S.A.) are in an election environment where we seem hell bent on bailing out a large fraternity of negligent financial institutions who have sewn themselves into burlap-size sacks of distress. The majority of the "plans" being put forth would involve draping the U.S. taxpayer further with debt, further putting pressure on the U.S. dollar...there is no question that some of the largest holders of the debt of these companies, and of our own treasuries, is - guess who - China and Saudi Arabia."

"What therefore seems indisputable is that we are paying off the sins of Wall Street, to the benefit of foreign nations, who - strangely enough - will be hurt in the long run for it all, unless they unhitch their ride from the sickly U.S. Dollar...With the credit and banking crisis screaming to new levels of fear and loathing almost daily, it worries many investors to think that they may wake up one morning to the headline that China has de-pegged from the U.S. Dollar out of necessity, to control their own rampant inflation."

"There are two ETFs that try their best to track the currencies of these countries. Wisdomtree's CYB is an ETF that directly attempts to track the Chinese Yuan. Given that the Chinese government has already tried to let the Yuan rise a bit, this ETF may actually give a slight to decent return while one waits for a possible "de-peg." It rose substantially earlier this year, before slacking off a bit in the second quarter.

The other way is Barclay's PGD, which tracks both the Yuan as well as the Saudi Arabian riyal and the Singapore dollar, among others. This method costs you 0.89% in expense ratio, which may or may not be off-set by any rise in the Yuan, meaning you get basically a flat return while you wait for the great currency domino trade to trigger - or not. "