Keeping The Powder Dry

Ulli Uncategorized Contact

As you can imagine, with the markets having devastated many portfolios, I have received a lot of client and reader mail expressing how this crisis has affected them, and how trend tracking has made a difference to those who followed its signals.

Reader Steve had this to say:

Many thanks from a very satisfied client. It is with a sense of relief that I can pull up my account balance and find most of it still intact. My heart is heavy when I hear stories from friends, family, and co-workers tell of their unimaginable losses.

You are truly a voice crying out from the wilderness with a message that has been MORE than validated through this current financial fiasco. I know that recovery will begin someday. But, in the meantime, I will be more at peace knowing that when it does I will be in a much better place to take advantage of it.

You are helping us “keep our powder dry” while we await that time.

I am not sharing this with you to pat myself on the back, but to make a point. The every day question has been when will this downturn end and where is the bottom?

While I don’t have those forecasting abilities, some people, whose opinion I value, have pegged a potential bottom, as measured by the S&P; 500, at 600 – 650. If this holds true, it would cap the additional downside at another -20%.

This means that buy-and-holders could potentially see their portfolios reduced by some 60%. It does not take a genius to figure out that once you have lost 60% of your holdings, you need to make some 250% on the balance just to get back to even. That’s truly a frightening number to accomplish.

If you are forced to go that route, you have will lost most of your ammunition to participate in a recovery, and the road will be long and painful.

That is what reader Steve meant when he said that we are “keeping our powder dry” to be ready to participate with a maximum of our assets when the upswing eventually occurs.

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Comments 4

  1. Is it correct that if the S-P drops to the 650 range the dow will be in the 6000 range at its bottom? Lets all hope it doesn’t go that low but nobody knows. Thats why we follow Ulli’s recipe for safety in times like these. Have fun at work and sleep good at night while your retirement is safe in CASH.

  2. I sat in on an investment seminar the other day. At the end of the seminar, the speaker asked for questions. I said, “So you would surely advise the prudent investor to be in cash?” He replied, “Absolutely NOT! Now’s the time to buy!” I said, “But what if the market drops another 20 or 30 percent?” He lamely replied, “Well, it probably won’t.”

    Oh yes, now THERE’S some solid investment advice. Love the buy-and-hold camp.

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