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Market Crash: Honister Pass

Posted by kdadmin on September 11th, 2015.

Market Crash: Honister Pass

This is the view of Buttermere, in The Lake District of Norther England. You only get this view if you managed to make it up over Honister Pass; a bleak place capped with a grimy slate mine. With its 25% grades, and “drunken cow” rambling roads, it’s not a trek for the weak of heart.

This photo is how most people hope the market will look after the Fed’s announcement next week. But this picture is misleading …

What you don’t see is the fluky wind. It’s blowing all over the place in every direction. Gusts from zero to 30mph made it quite difficult to keep my UAV stable. Not to mention the LFA (low flying military aircraft) that blast through here at heights of 250 feet (yes, FEET) in their combat training missions. Seeing a Harrier, or an F-15, only 250 feet above you as it blasts through the valley at 500mph is not something one forgets. Oh, and, their flight times are “secret” so you never really know when or where they’re coming. Sure, it’s pretty on the ground, but the sheep have no sense of danger and love to run right in front of your car on a blind corner. Animal safety aside, you don’t want to take one of these 100 plus pound animals across your grill.

I tell you all this in an effort to illustrate the random, unseen forces at work in this lovely picture of Eden in Northern England. It’s the same with the market.Everyone is essentially holding their breath in anticipation of the Fed’s move next week. Markets have been raggedy around the globe.

Opportunity Knocks? Maybe. But stock performance projections for the year have gone from +3% to -2%. Entry point will be critical to catch a year end rally. Maybe we’ll even get to Hunt the Black Swan again. Bond yields will likely tick up as bond prices drop in response to rising Fed rates, so portfolio duration and distribution rates will be crucial. The Chinese, Greek, and other foreign markets are in the middle of their own train wrecks. How much of that will actually be relevant in the domestic market, media frenzy aside, is anyone’s guess at this point. Even if the Fed doesn’t raise rates next week, it WILL raise rates in the near term. Postponing is only a stop gap. The next Fed meeting is in about seven weeks.

SO, what does this mean to you? If you’re an economist, LOTS. If not, it means you’d better have someone who understands economics running your investment portfolio. “Buy and Hold” (aka “It will come back”) would have lost you 6.3% so far this year. At least that’s better than the 57% loss the “Buy and Hold” strategy provided back in 2008-2009 …

In other words, you need a GREAT strategy. If you’re my client, you’ll have one.

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