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    Bad Times, Great Markets: How to Get, Keep, and Grow Money in the New Bull Market
    Bad Times, Great Markets: How to Get, Keep, and Grow Money in the New Bull Market
    Bad Times, Great Markets: How to Get, Keep, and Grow Money in the New Bull Market
    Ebook161 pages2 hours

    Bad Times, Great Markets: How to Get, Keep, and Grow Money in the New Bull Market

    By Robert M. Barnes

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    About this ebook

    Mr. Barnes has 35 years of experience on Wall Street as researcher and trader, with 12 books on quant trading by major publishers ( McGraw Hill, John Wiley, e.g.) This investing strategies book is for investors in general, people near retirement, and retirees; and details financial steps to take in the face of a weak economy with strong markets.

    The book is divided into a number of sections: a discussion of what is happening (markets around the world), what caused the mess, and finally what we can do about it.

    Chapter One details the history of markets: the many massive events and functional problems we face. Chapter Two reviews extensively similar market histories, and what they portend. Chapter Three maps out possible scenarios of can occur and a description of a new era.

    Chapters Four, Five and Six lay out job finding, cost cutting, money placement, and stock market selection and timing for three different groups: working people, near retirement workers, and retirees. A table of worthy stocks to choose (122) based on the best company analysis criteria (earnings growth rate), when the time is appropriate ( when to enter the markets), along with four model portfolios (growth, value, conservative, and new era), are presented. A very important capital survival formula is also presented.
    LanguageEnglish
    PublisherAuthorHouse
    Release dateAug 17, 2011
    ISBN9781463421724
    Bad Times, Great Markets: How to Get, Keep, and Grow Money in the New Bull Market
    Author

    Robert M. Barnes

    Robert M. Barnes, an experienced researcher and trader, has worked and consulted for many major Wall Street firms developing mathematical trading strategies for stocks, bonds and commodities. He has authored 12 books by major publishers.

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      Book preview

      Bad Times, Great Markets - Robert M. Barnes

      Contents

      Introduction

      Chapter One

      Chapter Two

      Chapter Three

      Chapter Four

      Chapter Five

      Chapter Six

      References

      Introduction

      I woke up the other morning in a cold sweat from a real nightmare: I was topsy, turvy and tumbling about in space looking at a financial horror show on CNBC, something about some bemused guy admitting to bilking investors out of $50 billion in a giant Ponzi scheme. When I opened my eyes I did indeed see CNBC reporting on this very fantasy. That day, a couple of months before that, and the months (years?) ahead prove out to be even bigger disasters, for everyone, here in the U.S. and the rest of the world.

      An unbelievable set of economic events, swift and deep, had sent us into shock. The events were surreal: a steady stream of foreclosures was preceded and followed by convulsions in the financial markets, major bank failures and financial firm recombinations, the start of massive job layoffs, heavy infusions of public money ( it may reach well into the trillions of dollars), credit freezes, and huge closings of retail stores. That’s the short list.

      I had to quickly act in my own situation. I had stood aside last year in my own trading but still had my (long term?) IRA as of September, 2008. I had held on through other market slides, most notably the 2000 drop. The drop then was pretty severe( at one point down 50%), but there was an orderliness and seeming end to the fall. But this time I sensed something really wrong ( I am a quant by education, but can also feel once in a while real market vibes): everything was cascading, a systemic catastrophe.

      I got out of my IRA stock funds, and moved the money a couple of times to bigger firms tied to commercial banks, the three largest I could find, for safety. I even hauled back an annuity from AIG to my checking account bank, which proceeded to almost fail and merge with another bank of tottering stature. Frankly, I was nervous enough to question even the government’s ability to continue social security and Medicare! There was no place to park your funds and get either a good or truly safe return: even short term Treasuries paid no interest – you were entrusting the Treasury to hold your funds safely, just parking them there for free.

      After a swift blow to the head and wallet, and the shock wave that continues, we have to ask, What Happened? Then, What Caused This Mess? And finally, What Can We Do About It?

      Chapter One goes into considerable detail about the massive and many events and functional problems we are facing. Chapter Two reviews the markets’ history ( throughout the world) with a fine detail of previous situations, including 1929, and what they portend. Chapter Three reviews what happened after government and the investment system reacted, and a description of a new era that will come to pass.

      Chapters Four, Five and Six lay out job finding, cost cutting, money placement, and investing places and timing for three different needs/capabilities groups: working people( Chapter Four); near retirement workers(Chapter Five); and retirees(Chapter Six). In Chapter Four I create a table of worthy stocks (what) to invest in (122 of them) for all three groups once the market has recovered enough of its drop to produce a new bull market, which it has (when to enter the market). Four model portfolios with specific stocks ( Growth, Value, Conservative, and New Era) are discussed.

      I sincerely hope you survive and prosper in these hard but rewarding times.

      Robert Barnes

      Savannah, Georgia

      Chapter One

      The Mess We’re In

      Humpty Dumpty sat on a wall,

      Humpty Dumpty had a great fall,

         All the king’s horses

         And all the king’s men

            Couldn’t put Humpty Dumpty together again

               -Humpty Dumpty; a nursery rhyme

      Out going President George Bush in his last press conference was asked to reflect on his terms in office, his accomplishments, disappointments, wishes. Finally, a reporter asked him his thoughts on the economic drop and where the economy was headed. He replied that he didn’t think anyone knew what had happened or where it was headed, nor did he know. He was right on the first, and clueless on the second.

      President Barack Obama has said he plans a trillion dollar stimulus package. We’ll need it, and it probably won’t be enough. The grand total ( for his first term) will probably be closer to 2 trillions.

      Where are we, what got us into this mess, and where are we headed?

      It is, without doubt, the biggest and broadest economic calamity any of us has ever seen. It may even dwarf The Great Depression (See Chapter Three).

      But we should not be overly horrified: great economic booms and busts have occurred often and almost regularly in the past. Bottom line: it’s all due to human emotion: greed and fear. Greed pulls them in the markets, and fear drives ’em out! (Read Kindleberger(7) for an exhaustive insight into literally hundreds of disasters throughout the past four hundred years, and especially his boom-bust table that goes on and on). We’ve had many bubbles, and more are to come.

      We can easily blame the Bush administration( for lax regulations and enforcement, laissez fair attitudes, and inept administration officials, the costs of both wars, and weak-willy attitudes to get the economy going again, and other things too numerous to mention): but many others are also complicit: congress, with its quarreling, inefficient and unimaginative processing of ideas; companies and individuals overreaching investments and expansions; governments and institutions continuously on track to overspend and expand at unsustainable rates, all leading to the inevitable Boom and Bust!

      But, most of all, we, the consumer, rich people, and average citizenry, have overspent, overly lusted for more and more. We have only ourselves to blame, ultimately. It’s in our nature to want more, compete with the Jones, and create unsustainable prices and levels of production.

      Before delving into this mess in greater detail, let’s diverge to a typical day in the economic world, represented by a daily scene on CNBC.

      Cnbc 10/29/2008

      It is 8:30 a.m., and the consumer confidence number has just come out. Mark Haynes’ face drops, he emits a sorrowful grunt, and comments that, at 38%, it’s the lowest in recorded history, versus 63%, itself low, for September. Not a good start for the day, especially since yesterday had been a great one, bringing cheers and hope from the investment multitudes: The Dow Industrials had been up nearly 900 points to almost 9100, the S & P 500 had spiked up an enormous 90 points, and the struggling NASDAQ soared 143 points, sending recovery joys to many traders.

      Yet Mark, the perennial Dour One remarked that this was the 79th anniversary of Black Tuesday of the Crash of 1929. He also remarked that two weeks ago the Dow was up 900 points, then hit new recession lows of 8160. Also, the Nikkei ( Japanese stock index) hit a new low(7200) since 1992. It is not an auspicious start for the day, nor for recovery hopes. But we must trudge on, in hopes that the day and the nascent recovery will continue upwards.

      A governor and senator were just on, laughing. What in the world were they happy about? Their own cozy, blustery, safe positions, not the investors’ or consumers, presumably.

      Joe Kernan, David Faber and Becky Quick were still on commenting about a few companies. The Libor(London Interbank) rate stood at 1.14%, reflecting a low short term rate, the FTSE was up 227 to 4150, the CAC40 +225 to 3340, the DAX stood at 4803, down 30, the Shanghei Index was down 52 at 1719, but the Nikkei was up 599 at 8212.

      The short term rate on Treasury bills is very close to zero, meaning people are paying the government to just hold their funds for safety’s sake, they’re so scared of all market holdings (stocks, bonds, real estate).

      Oil is up $3.13, but still in a wicked downtrend from a historic high of over $140 earlier in the year, standing now at around $67 per barrel. How much lower can it go, before the inevitable bull market starts up again? T. Boone Pickens assures us that it will go to $200 soon, and he has put billions of his own money into oil. Oh, the sorrows of misfortune! If only we could but glimpse one day into the future!

      Gold stands at $750.8 per ounce, up $10.2 from yesterday’s close. The gold bugs still insist it will go to $2000 as more panic sets in. Little do they know all assets will be flattened ( Bill Gross, PIMCO, predicts earlier in the summer).

      But one bright spot is on the horizon: the dollar is faring decently against several currencies: the Euro, Pound, and some other European currencies; but not well against the Japanese Yen, which has been pummeled, along with its economy and assets, since 1990.

      Governor Bill Ritter of Colorado is being interviewed. His is from one of a few states that is showing some uptrends in its economy and employment – versus others like Nevada and California, which are especially on the ropes in almost every category, and really hard hit in real estate. There are rumors that it(California) might have to declare bankruptcy ( A state? What on earth for? It can always taxersize the living daylight out of everyone and everything that walks or crawls in that God forsaken state [ natural calamities, to mention one area] ).

      A Fed decision is coming today, at 2:15 p.m., when observers expect a ½ point lowering of the funds rate. Little does anyone know it will eventually touch virtually zero. They want to give money away, so desperate are authorities to jump-start the economy. In anticipation of that move, two former Fed governors, Meyer and McTeer, are interviewed. They echo current members’ feelings that the liquidity crisis must be broken, to give more money at cheaper rates to banks who in turn lend out to credit worthy firms. The trouble is, the banks will continue their reluctance and refuse to lend out, because they’re afraid of more defaults by many ( they don’t trust anyone yet).

      Charlie Gasparino comes on for a special on financial firms urge to merge. On the agenda today are Morgan Stanley (disclosure: I worked for them in two capacities, as researcher in alternative investments, pairs trading, and as a broker) and Goldman Sachs, both looking for partners and a way out of the financial loss syndrome ( they are both highly leveraged in some debt and other areas, to the tune of as much as 40-to 1). The investment bank community has collapsed, with only these two surviving. They eventually seek protection in commercial bank charters, which further clips their wings are far as investment banking. Morgan Stanley is currently at 15, and will drop further to 8, when some relief comes from Mitsui Bank($10 billions) and a like amount from the Administration’s TARP

      (Troubled Assets Relief Program). Goldman Sachs stands currently at 93, goes down into the 60’s before recovering some. It doesn’t seek outside funds.

      Art Cashin, a UBS floor trader, sees the Dow below 7800 next year. Too much carnage, too long before meaningful recovery.

      9:15 a.m. Dow Jones Industrial futures show an opening projecting up 15 from yesterday’s close. As with every day this fall, opening, midpoint, even 3 p.m. numbers mean almost nothing to forecast the close, as volatility

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