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Out of the market

September 19, 2013 - Harry Eagar
Although I was a business reporter for most of my 45 years in newspapers, I was not much concerned with big issues; I covered local doings. When people asked, as they often did, for my thoughts on markets, I would usually say, "I'm 6,000 miles from Wall Street. You should read Barron's."

That was not particularly an endorsement of Barron's, just a way of saying I wasn't keeping up with day-to-day market gossip. That also did not mean that I didn't think I understood markets. I think I do.

When RtO started early in 2008, its constant theme was that the "rescue" of Bear Strearns was really a suspension and market failure, papered over in the interests of Wall Street, not of ordinary investors. I dated the market failure to August 2007, which I believe is pretty generally agreed by historians now, though I do not recall many other people saying so at the time. (The concept of a concealed market collapse is, I think, novel; it is an outcome of effective central banking, which can keep paper levitated for a surprisingly long time, but not forever.)

Anyhow, all through the summer of 2008 I broke my habit of not giving market advice to the extent of repeatedly advising followers of RtO to conserve cash, which meant cashing in securities -- funny word, that, in the context.

I didn't cash my own securities because I didn't have any and as far as I know, nobody else did on my suggestion either.

It wasn't the first time during my reporting life that I foresaw a capitalist coup but missed getting rich because I didn't have any capital. My heart is with the working man.

Now I do, and I've been waiting for a chance to sell short. This morning I dumped almost all my equities.

One of the brokerages I use published a roundup of expert opinion that the federal fiscal crisis should not unduly disturb markets. I think otherwise. I anticipate a correction -- marvelous Freudian word! -- by the end of October, after which I will repurchase most of the securities I held until yesterday.

Just more of them.

That's the plan anyway.

There seems to be a disconnect between newspapermen and financial men. For example, this morning Greg Sargent had this to say in the Washington Post:

'* YEP: WE’RE HEADED FOR CHAOS THIS FALL: Norman Ornstein lays out the reasons he thinks a government shutdown and/or debt ceiling default are genuinely possible this time around. If anything, John Boehner is exerting even less control over the Tea Party wing than in 2011, while Mitch McConnell — facing a challenge from the right — has less of an incentive to step in and fill the vacuum. Meanwhile, the hope that a few GOP Senators splitting with party leaders and dragging their party towards sanity has waned. Utter chaos."

I can't lose. Should sanity break out and I lose money (more precisely, fail to gain), my country would gain.

I'm still rankled that I couldn't buy Chesapeake Bay Bridge-Tunnel C bonds at 190 in 1970, though. They paid off at par.


Article Comments



Sep-19-13 9:32 PM

It's gambling for the ordinary investor. The deal is rigged for the rich.

It is possible for a small investor, like me, to make money, by understanding the psychology of the market and by looking for repeats of historical events.

I do pretty well. I should have said in the original comment, although I think this is a good time to cash out, watch out for your tax consequences.

My portfolio is such that I won't take much of a hit there, and besides I've been needing an opportunity to back out of preferred shares, which are going down in the medium turn, almost surely.


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