My 1st Million At 33 – yes, you can do it too

Last week majority of the stock market gain for the year was wiped out. The violent drop in the stocks probably had most investors in shock. Has the stock market done dropping?

ML’s post last Friday was optimistic. But I’m more bearish, especially on the US stock market. I believe that the recent subprime woes are really just the beginning. The great mortgage ARM resets are not even here yet. But so many lenders (and stocks) have gone under already. ml-implode.com reports that there are 105 lenders imploded. Stocks such as AHM, NFI, LEND, IMH, CFC have suffered tremendous loss. In fact, the worst thing for this stock market is liquidity loss in the credit market. And that is really happening.

With the exception of BillCara.com, many other pundits have already turned negative several months back. To name a few, Puplava, Bob Hoye, and Frank Barbera have all been taking negative stands. Of course, none of them was able to time the peak exactly. Timing the market is extremely difficult. But it is more important to take a stand for the intermediate term rather than getting bound to the daily whipsaw in the stock market. And for the intermediate term I believe that stock markets will be going down by 15+% from the top (which may or may not have happened).

It is true and amazing that Shanghai’s stock market is at a new height. And that is very positive for global stock markets. While a parabolic rise is not sustainable, (I forgot that) it is NOT guaranteed that a fall is automatic. In fact, mathematically from the book of “Why stock markets crash“, it is only required that the mathematical curve changes to a different function instead of continuing on a unsustainable curve. That is probably what is happening in the Chinese stock markets. With Chinese stock market holding up, I believe that US stock markets will continue to underperform foreign stock markets going forward.

So what kind of actions one should take from now? I just want to repeat my disclaimer: This is solely my opinion, not any formal investment advice. Please only take them as such. Short term wise, I will be looking to sell more once the stocks go back to its 50 days moving average. Long term wise, I’m very positive on the stock markets, especially BRIC (Brazilian, Russian, India, and China) and emerging markets. For the intermediate term (for 6 months out), I’m negative on US stock markets, especially priced in foreign currency or gold. As I have said previously in my net worth review, I’ve sold out all of my general stock market holdings at the end of June. All of my company 401K are in cash/short term bonds now. (Note: I asset allocate across all of my accounts, and won’t hold stocks in retirement accounts only because I can’t/won’t get those pre-tax money out.) However, I continue to hold a significant amount of energy holdings that are tied to economic growth, and a lot of precious metal & mining companies to hedge against a US dollar fall. I also continue to hold my company stock options, and intend to ride out the upcoming intermediate storm. Bernanke has not officially helping out the stock market bulls. I fully expect that he will not let deflation get out of hand, and will create more paper money and credits like there is no tomorrow (well, if not already). With that understanding of US Fed, I’m positive long term on pretty much everything except cash and bonds.