A Look At 2009

Without a doubt, 2008 was quite a turbulent year in the financial markets. If you learned nothing else, as you have seen, it pays to set stop losses for even the longer term investments. Years ago, I heard many say that real estate never goes down in value. Hmmm, looks like that turned out to be a myth. But hey, it was a fun year and you have to learn to roll with the punches and take a shot now and then. Remember, there is great money to be made when things head south.

Every day I look at the markets as being one big open door or money tree, if you will, that can be shaken and stirred. As long as prices are moving up and/or down, that tree can provide you with vast riches in the form of profits. All you have to do is be brave enough to shake the tree and stand under it with your bucket. And you do not need to listen to all the experts for as we have seen in times like these, "They Know Nothing" as some famous person has said over and over. Even the experts are at a loss as to how to proceed because most of them can only make it when the markets and values are rising. You, on the other hand, have a deep sense of self worth and while keeping your fears from turning into full blown panic attacks, you have the advantage of being able to create and follow your own investing road.

Now is the time to be an individual because it is the heard that is seeking a savior (no, not Obama) and someone to lead them to the promised land of milk and money. Go your own way and be secure from within yourself. You, and I mean all of you, have the power to become truly great and prosper in the financial markets. It is true that money is not everything or even most things. But it is a part of our created life here in this world and it is fun to have some, or even a lot of it. Just ask some rich person.

I still believe that much can be accomplished using deep-in-the-money options as a vehicle for trading. And it is a trader you have to be in this type of market. Look at the markets today compared to several months ago. We have been in somewhat of a rally mode and it seems all is forgotten as far as the severity of the economic crisis. Soon that will change. Ask yourself if you think this is really the start of a new bull market. No way, Jose. There will be another sharp sell-off and it might even take out the previous lows. Things seem cheap from where they were a year or two ago. That is normal, since we can't compare the present to unknown future prices. However, if you look at the possible fall in earnings that will certainly occur in the coming quarters, then things don't look so cheap.

Anyway, everything goes in cycles and it is about time we had a monstrous market plunge. I think it is possible we have not seen anything yet, compared to what is to come. Yes, I know it is negative to make scary market predictions. I refuse to totally predict the market's future. All I am saying is that the chances of a far more severe crash than is expected looms large. Be prepared, for this is not the time to make long term commitments. That time may come later this year or maybe in 2010 0r even 2011. There are many forces at work here and they are deeply entwined. Not even the Obama economic miracle will save us.

It just happens to be a time in our history that calls for deep retrenchment of the economic sins of the last 20, 30 or even 50 years. We have as a nation and world been living on borrowed time and the piper has made a call. Even after we get through this mess, another even larger monster looms in the background ready to totally decimate our economy. That is the twin evils of social security and medicare. Not even our government and Uncle Benny will be able to stave off the massive hemorrhaging that our economy will go through. But, first things first.

Here is the big problem right now. The US consumer accounts for about 20% of the world economy in the form of spending and consumption. One can hardly go on consuming and spending so freely if the threat of losing your source of income becomes real. So as much as you want to help the economy and spend your earnings, it would be prudent to cut back and many of you will be forced to curb your habit. As a result, an American consumer who is cutting back on consumption means that businesses will see less income coming in the door. They will be forced to trim their spending and expansion and on and on it goes. Even if the "gov" steps in, the stimulus will be like placing a bandage on a deep laceration that may require stitches or surgery. On the other hand, consumers will be limited in how much more debt they can chalk up on their household balance sheets. This is a critical point for our economy. Fewer jobs, less expansion, less security, less confidence, less credit and fewer assets makes for dire economic conditions. We can not spend our way out of this one. Not this time.

You as an individual have control over your financial destiny. You might not believe it so and therein lies the difficulty. Change your beliefs and prosper. Creating a comprehensive plan will help you get there. A little of this and a little of that, without the use of credit, may be the right prescription. As long as you blame it on others ( your financial status) or blame some outside force, you will remain subject to the tides of worldly economic affairs. And the tidal wave is about to hit in the form of a tsunami. That is my opinion, and I could be wrong and I could be terribly wrong and by the end of this year we are growing by leaps and bounds again.

Nimble trading is called for and taking a risk is needed to prosper. Nothing wrong with rolling the dice. Just know what you can afford to give up to the markets and quietly back away if you reach that limit. There are always other plays to make. Take care and stay well.