Comments for Prudent Money Market Outlook

Comment on Wake Up and Smell the Risk by Steve Wisdom

Steve Wisdom — Mon, 07 Dec 2009 23:13:28 +0000

Dear Bob:
Good reasoning on the debt situation, seems that everyone has forgotten the original TARP strategy of swapping the banks illiquid MBS for Treasurys or better yet, Cash, instead the Treasury Dept gets into the Bank Equity business, I have never heard a single news article on the Fannie Mae Preferred fiasco that the big banks held as a Tier 1 Capital asset, Fannie Mae had 17 different levels of Preferred Stock, what person in their right mind would think any company would be viable with that many different levels of Preferred?
Anyway, have a Merry Christmas to you and your family.

Sincerely,
Steve Wisdom

Comment on The Ultimate Bubble of Hope by Personal Insolvency Surges and Tax Revenues Decline | Bob Brooks - Prudent Money Blog

Wed, 18 Nov 2009 15:01:38 +0000

[...] on the show, sent out this press release on what is really going on. This echos my concerns from my stock market outlook just posted [...]

Comment on The Ultimate Bubble of Hope by Claimed Stimulus Job Creation Is More Phony Government Accounting | Bob Brooks - Prudent Money Blog

Tue, 17 Nov 2009 18:24:23 +0000

[...] want to go back to what I wrote in my stock market outlook. The stock market is going gangbusters based on the notion of recovery and an administration that [...]

Comment on What the Government Bond Markets are Saying About Stocks, the Dollar, and Gold by Bob Brooks

Bob Brooks — Wed, 28 Oct 2009 02:39:44 +0000

A deflationary recession is a tough one on investors. If the analysis is correct, it could resemble much like last year when bonds and stocks fell at the same time. In deflation, all assets fall. So that doesn’t mean that there are no opportunities to make money. It means that buying and holding in anything can be a bad idea. The key is having an investment strategy where you utilize alternative investments and you are strategic with your investments. The good news is that we will have some great buying opportunities. The key is having an exit strategy.

Comment on What the Government Bond Markets are Saying About Stocks, the Dollar, and Gold by JT

JT — Wed, 28 Oct 2009 01:34:14 +0000

If what you describes occurs, what do you think TIPS will do? I know bond prices typically go down when interest rates rise, but as I understand what you said, interest rates will rise but deflation will result, so it seems no place including TIPS is safe?

Comment on Cash Levels of Mutual Funds Can Be a Good/Bad Indicator by Bob Brooks

Bob Brooks — Mon, 28 Sep 2009 17:33:43 +0000

Dean – I don’t think that we are that much in disagreement and I appreciate your thoughts. The single biggest problem that I see is that Wall STreet is viewing through this the lense of a normal recovery cycle and there are to many additional elements that prevent this from being that type of cycle. At some point the market catches up to that and it will be a problem. For instance, unemployment is a much worst problem today than any other time since the great depression and besides some stimulus jobs Obama has no solution for this one. Second, the defaults that we saw in the ARMs market is about to gear up for the second phase. We have been in a lull most of the time. I think that this next cycle will be far worst. Having said that, I cannot imagine the market performing well within that context. Finally, you are dead on with interest rates. Bernanke is creating a terrible situation by artificially supressing yields. Once that problem resolves itself the mortgage markets will be in a much worst situation.

You are correct. The yield on money markets does push people out of money markets and forces them to chase risk. Ironically, they are going more into bond funds than stocks. I think that there is just as much market risk in the bond market (interest rate risk)

Comment on Cash Levels of Mutual Funds Can Be a Good/Bad Indicator by Dean Thomas

Dean Thomas — Mon, 28 Sep 2009 17:15:45 +0000

The “Great Recession” that we are living through will probably end up being the worst post-WWII recession & since it also involved a financial crisis the economic recovery (not the markets) will also take longer. However, since the markets move on UNEXPECTED changes (things that are different from current widely-assumed predictions), & everyone is predicting a weak & slow recovery, there is a good possibility that the economy can’t disappoint anyone more than it already has (any additional predicted misery is lunatic fringe noise). As a result, any whiff of a better than expected recovery will fuel a MARKET rise, as the ECONOMY is still weak.

Therefore the ECONOMY will continue to suffer but little positives here & there will fuel a MARKET rise. Once the economy is healthy again it will be time to SELL.

Most recent market rises have been bubble-type moves
(oil bubble, gold bubble, etc.). I am calling the current market rally the “1/4% money market rally”, simply implying that ultra-low yields in money-markets are helping fuel the rally with high-octane. Much of the rally has been justified, & you either participated & have been rewarded or were afraid & wonder when do I start risking again. Bernanke is inadvertently creating a bubble with low yields, but can’t raise the yields until the ECONOMY starts to recover. That is why you must risk today because you can’t afford to risk once the economy recovers.

Comment on Unprecedented Times Create Unprecedented Events by Bob Brooks

Bob Brooks — Mon, 28 Sep 2009 01:12:30 +0000

Patricia – it is tough for me to say in this type of forum not really knowing anything about your situation. You just have to determine if the risk you are taking is something that wil completely set you back years in the event that the worst is not behind us. This is not advice by any stretch. A 25 to 30% position is one that has held up with a portfolio fairly well in turbulent times.

Comment on Cash Levels of Mutual Funds Can Be a Good/Bad Indicator by Bob Brooks

Bob Brooks — Mon, 28 Sep 2009 01:10:27 +0000

Dean – I would agree. There is always risk and something to be leery of just in normal times. The market is pricing in what the market feels is in the next 6 months. As it did in October 07 and I think now, the market is not pricing in the risk that is clearly present. It is nor obviouis. If it were, the market would have acknowledged it. It is always about what the market doesn’t either want to akknowledge or doesn’t see. For instacne, a real estate bubble back in 07 was obvious. I am not saying that because of hindsight. I am saying that because I fully documented the evidence ahead of time. If there were an abundance of evidence that suggested the worst was behind us, the risk/reward ratio would be favorable. I don’t think that is the case. Further, the majority of money managers and investors got it handed to them in 08. Thus, the line of reasoning is not always correct when it come to risk.

Comment on Unprecedented Times Create Unprecedented Events by Patricia Vise

Patricia Vise — Sun, 27 Sep 2009 00:58:28 +0000

As a 66-year old widowed retiree, I have 38-40% in stock market and am wondering what I need to do. Would you suggest selling stocks that are doing fairly well now, in case we do have a double dip recession, or ????

Thank you so much for your help and for your prudent advice!