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I am a trader but I can also put on a LT don’t-want-to-watch-every-day “long-only” investor’s hat. There is a very, very simple signal, of very long term validity, proven through many decades of market activity, known as the 20/50 moving average. It is foolhardy to ignore it, because it is so effective.

In this post, I linked a video detailing how the signal works, how you use the signal. It’s explained very clearly. You don’t have to look at it any more frequently than weekly and it is not useful to do so.

http://www.freerepublic.com/focus/chat/2037220/posts?page=33#33

Also in that post is a place you can go to see where the signal sits today. As of mid-late January, it has decisively generated a “don’t be in this” signal....that is, if you’re a “long-only” investor....meaning, you don’t short stocks, you don’t hedge, you don’t play options, and you don’t want to or aren’t yet confident enough to pick individual stocks. On the chart site, stockcharts. com, enter “SPY” as your stock symbol, which is effectively the S&P 500, the benchmark against which all mutual funds’ performances are gauged.

You are looking at the crossover and crossunder of two moving averages with this signal. When the “faster” eg; shorter duration MA crosses over the longer-term MA, you do not want to be in the market. It’s that simple. We are in such a condition. It is NOWHERE near over for US markets.

One thing to realize, is that we are seeing long time veterans of the market getting absolutely bludgeoned here, and I mean smoked. Bill Miller of Legg Mason is down 45% YTD. The most advanced, slickest broker/bankers are down between 40 and 60%. Thinking you can outwit these guys is a tad on the naive side.

This is a very, very dangerous environment here, because so much is in flux. We do not know how much a dollar is worth. We do not know how much oil or corn it will buy. We do not know if high oil will persist, but IF IT DOES, there is no way the economy can handle it over an extended period. There is at least some likelihood of an Obama presidency and Dem congress, which is a guarantee of much higher taxes, continued resistance to oil drilling, a general assault against big drug stocks via socialized medecine programs, and most importantly, a possible sunset of currentax treatment of cap gains and dividends which are among the most favorable in history. At some point, you have to weigh the upside catalysts against the downside catalysts and see.......whatever you yourself see. IMO you’re every bit as likely to outperform virtually any stockpicking with a dumb CD, or, better, a general obligation bond fund sited in your home state which could be double tax free. Yes, CDs, even paying as crappy as they do.

Personally, I don’t think there are many sectors of the economy that are making money here, and even more importantly, I don’t think there are many sectors EXCEPT for the banks and arilines where the stock prices reflect the collapse in earnings power these companies are likley to go thru. The ONLY sectors I believe are capable of making money here are coal and fertilizer and steel. Some gold. But that’s just my opinion. IMO this is by far the most dangerous investing environment in 5+ years and the upside doesn’t come close to outweighing the risks.

Another thought exercise occurred to me that might make my comments about “growth” stocks more concise.

In 1995-2000, what were the so-called “growth” stocks? Can you name ten or twenty of them? What were their prices then? What are they now? DID THEY “GROW”??

Without even looking, I can practically guarantee you that Exxon, Conoco, Anadarko, Alcoa, US Steel (hoy!) and maybe Caterpillar and Deere and Phillp Morris weren’t in that “growth” club. (Maybe I am wrong, but I doubt it) And these aren’t stocks you had to dig out from anywhere arcane, these are Dow or big fat SP100 stocks.

No, everything back then was INTC, CSCO, Lucent (Gaaaah!) SUNW (Gaaaaah!) and it was going to go on forever and if you were a little queasy about those high PEs you invested with Jack Welch and bought GE. Or GM!

“Growth stocks” are stocks that Wall St wants to sell you because, well, who wouldn’t want “growth”? Next time your broker urges you to buy some “growth” stocks tell him you want some “shrinkage” stocks, and see how that goes over, LOL.

“Growth” stocks are primarily air, UNLESS, you are in a secular bull market, and my friend, that is the farthest thing from where we are. You cannot fight this or wish it away. In investing, you rarely get rewarded for brilliant, original thought. It is an incredibly exceptional investor who can consistently pick exceptional individual winning stocks. It is far more common to be aboard a train whether by plan or luck, that carries ALL or MOST stocks in a favorable direction. Turn that statement around and you’ll see that if the train isn’t moving favorably for most; “most” being longer-term, long-only investors, you’re far better off not being on it.

We also approach the demographic issue of baby-boomer retirement. The stock market is running out of people to buy their stuff, and if you think investors are eager to take on Wall St’s NEXT tranche of cool stuff after being gutted by the fetid sub-prime and Alt-A crap that’s been pushed out to every corner of the globe....I think that’s wrong.

I would bet good money on the following: That for 85% of investors, the next three to five years, stupid, simple CDs will outperform their stock market picks.

And guess what? IN GOOD times....I’d make the same statement and maybe reduce the number of CD-outperformers to 65%.