Daily Investment Interpretations

October 2, 2008

2008-10-2:   It's more-or-less official: the economy is in recession. Oil fell to $93.57 a barrel on a rising dollar. The markets dropped almost as low as their closing prices on Monday. The Nasdaq lost 92.68 points to 1,976.72; the Dow shed 348.22 to close at 10,482.85, and the S&P fell 46.78 to 1,114.28. After peaking at 46.5, the VIX ended the day at 45.26. Amazingly, gold dropped $43.00 to $844.30! (Lower gold prices seem to have stimulated the purchase of gold coins to the point where it's hard to find a 1-ounce golden eagle at $9.95 over the melt price.)
    The customary advice when stock markets fall is: "Hang on! Don't try to time the markets. You'll only lose." Normally, I would be emitting the same advice, but this isn't a normal bear market. My advice is to sell ASAP, and hope to buy back in before the markets go too far back up. (There are strategies involving ultra ETFs and call options that can help you amplify your gains when the markets finally do head higher, but right now is no time to be a long-term buy-and-hold investor. I'll advise when such strategies become advisable again.)
    Today, I bought 50 shares of QID, the Proshares ultra-Nasdaq ETF, as a hedge against further declines in the 50 shares of QLD that I own. Of course, I'd probably be farther ahead to have simply sold my 50 shares of QLD this morning. I also bought 40 more shares of the gold ETF, GLD, when it was down this afternoon.