Betting against the American economy (My bet against the Dow)
Throughout the months of March and April, as the markets were moving up and down, Steve, my roommate, and I exchanged 125-150 emails on the subject of the market. Some of the time I would email an article that I knew Steve would disagree with, just to get a discussion going. Much of the time, I was pointing out that the markets were still too high and how more bad news was forthcoming. I complained as the markets moved positively on bad news such as increasing unemployment or companies not losing as much money as predicted. He complained the markets pulled back from earlier gains on things like housing news and the analysis of bank quarterly earnings. Eventually, this led to the following email exchange:
my roommate:“will the DOW hit 9000 this year? ill bet you $20 bucks”
me:“Just because it hits 9000 doesn’t mean it will stay at 9000. I’d be dumb to take this bet because all you have to do is hit 9000. it could go down the next day, but you could still claim victory.”
my roommate:“ok whats your bet then”
me:“My bet is that DOW will unable to sustain 9000 for an entire month during 2009. 20$.”
my roommate:“deal. dow stays above 9k for a month
remember that you are betting against the biggest badest economy in the world: the american economy. while capitalism and all these ’stupid banks’ show how capitalism goes astray – it also adapts quickly – there is a monetary incentive to do so.”
me:“and you’re betting that the illusions created in this current market will hold up.”
As of today, the market stands at about 8360. The market has swung up as high as around 8500 recently, but nowhere near 9000. Now I realize 2009 isn’t over yet and that it is too early to claim victory, but, I don’t see the Dow making 9000 this year. I think there is going to be more bad debt writes off by the banks and more prime borrowers having problems due to job loss and declining home values. The banks in their quarterly earnings reports were increasing their provisions for bad debt. So even the banks are expecting more bad news. From time to time I will update the status of this bet.
Feel free to leave your comments or predictions for the Dow / markets in 2009.
- News Link - A 15,000 dollar tax credit for buying a house after all?? I saw this link on one of the message boards I frequent. Apparently the Senate wants to increase the home buyer tax credit to 15,000 and remove the income and first time buyer restrictions. Originally, when the stimulus bill was being considered in Congress, the first time home buyer tax......
- Its Been Awhile since I've Posted (Sorry for the long Post) Its been awhile since I have posted to tumblr, since then…. 1) the markets crashed to 6500 and subsequently returned to about 8000. Originally, I wanted to buy as much as I could afford with the Dow below 7000. With the Dow at 8000, stocks are still relatively cheap and......
- My Experience Upgrading the iPhone 3G to iPhone OS 3.0 At Apple's World Wide Developer Conference, it was announced that iPhone OS 3.0 would be available on June 17. When June 17 finally came, I was excited to try out the new iPhone OS! I plugged my iPhone into my computer and set off to start the update process. The......
- Game Changing News for those who collect miles and points - American Airlines One-Way Mileage Awards!!! According to Dansdeal.com (a site I frequent for deals and news), American Airlines has just launched one-way awards. I've been waiting for US-airlines to allow their frequent flyer members to redeem one-way awards. Previously and on all other US airlines, if you wanted a one-way award, you would have to......
- Restaurant Review - Ike's in downtown Minneapolis On Wednesday evening, I met up with some friends who were coming from out of town to see the Twins / Red Sox game. One of my friends really likes burgers. Originally, we weren't going to attend the game and I was going to take my friends to Town Talk......
Related Websites
- Gold Investing for Retirement I often ask myself whether I and other baby boomers should be investing in gold or gold stocks for retirement. On the one hand, a good financial plan needs an inflation protection strategy and precious metals are favorites as an inflation hedge. On the other hand, gold is notorious for......
- Is The Stock Market Overpriced? The Dow has currently been up 24 out of the past 27 sessions. From what I've heard, this is a record. Its NEVER done this before!!!!And its not like the US economy is rock-solid. According to Chuck Butler of Everbank.com, the US unemployment rate should actually be at 12% instead......
- Has anyone read this article? Good food for thought? Why the Dollar Bubble is about to Burst? IRAN HAS REALLY DONE IT...more deadlier than the nuclear.. The Voice (issue 264 -) ran an article beginning, ' Iran has really gone and done it now. No, they haven't sent their first nuclear sub in to the Persian Gulf . They......
- 10 Reasons You Should Never Short a Stock or Index Fund Short sellers are often cast as the big bad villains on Wall Street. After all, they are the all knowing, short term traders placing big money bets hoping your portfolio goes down in value while they turn a quick profit. Unfortunately, for all of the bearish sentiment they spew......
- Where To Invest Extra Cash and Savings Today Have you got some extra cash you’ve squirreled away, waiting to be put to good use? If you’ve got your debt paid down and your emergency fund taken care of, and you’re fortunate enough to have additional disposable income or a windfall to work with, then here are a few......
it all depends on this summer. if the summer is weak, down we could go again. if the summer is weak, it will be a slow recovery. if the summer is surprisingly strong or numbers start returning to ‘normal’ then 9000 is certainly in the picture. remember 9000 is still a full 5000 below the markets high in ‘07….so even 9k or 10k doesnt mean ‘things are rockin’.
so i still think we can hold 9k for a month, probably this fall.
why?
because of many reasons.
besides, where else are you going to put your money? china? ha! even the chinese invest in america buddy. they know that is where all the technology and innovation comes from.
What I don’t get from this story is that this guy is your roommate, have you ever thought about talking instead of sending 125-150 emails?
For the record, I am ProShares 2x short on the S&P500 (“SDS”) at about 900. I have an auto-sell on at 820, so I am betting in your camp.
I should have been more clear…these emails were all during business hours…while we were “multi-tasking” at our places of employment…of course i talk to my roommate…:)
All I have to say is, I am not surprised that you send your roommate articles because you know he would disagree and to get a discussion going.
Thanks for posting, I very much liked your latest post. I think you should post more frequently, you obviously have natural ability for blogging!