Nothing takes the past away like the Future

• People are at restaurants, at the movies, attending concerts, and getting gas...yet stocks have fallen to levels worse than the great depression...when we had soup kitchens and 20% unemployment. Many situations are simply no where near as bad as the stock prices on your screen suggest. There are times when the stock price is just plain wrong. How do we know this? Because stocks that were $120 or $50 5 months ago and have dropped to $5 or $10 were dead wrong at the levels just 5 months ago.
• Valuations on many stocks are lower that 72-73 bear market.
• Thinking irrationally now and shorting all these stocks at 5x earnings just because they go down every day is as crazy as buying the Internet stocks in 1999 just because they went up every day...thinking valuations don’t matter.
• I had this typed and ready to email around 2 pm on Friday (I did post in the chat room). The negativity is so thick, the panic selling is so crazy, and valuations are so low that I firmly believe prices have WAYYYYYY overshot reality for so many stocks that I am tempted to go “all in” on full margin here and yell from the rooftop to buy hand over fist (with a realistic yet loose stop -15%ish).
• Money will not be made buying WMT, JNJ or Mickey D's. The massive money will be made buying stocks that are down 75 percent that have the mother of all snap backs. There are hundreds of names that will survive, have little debt, sound biz models, and the valuation is insanely cheap.
• To give you a sense of how crazy some things have become. Dry bulk shipping rates (grains, iron ore, etc) for global trade have dropped from $233,000 per day in June to $3,100 per day this week. What on earth drops from $233,000 per unit to $3,100 per unit in 5 months? Maybe $233,000 per day was a bubble, but even if we assume $80,000 per day as normal…what drops from $80,000 to $3k? It is not rational and is not sustainable.
• Stocks that are $5 or less can be treated as call options with no expiration.
• After going through the charts this weekend for several hours…I have never, ever seen so many stocks that I want to buy at crazy cheap prices. I now believe we have seen the low for the year.

I am not making money right now...

I'm not making money lately as the tsunami of declines has gone to extremes I just did not foresee. I wake up each day and think there is no way I can be surprised any more than I have been already...and everyday I am surprised again (these last few weeks in particular). Things seem so dire right now that it almost seems impossible to even consider that the market can ever muster a rally. What keeps us going? The opportunity to make an ungodly amount of money once this ends. We just need to get there with as many financial and emotional marbles as possible…even if it is less than we had Sept 1st (hand raised).

The pace of pain and despair is accelerating.

• The pace of pain and despair is accelerating. The erosion of wealth and confidence is more widespread than ever (it is worldwide and billionaires are losing fortunes too). Government leaders are scared and no longer trusted, company execs are as downbeat as ever, and individuals are fighting for their financial lives. There is little doubt that most are more concerned about survival than profit at this point (I am still looking for profit for what it’s worth). In a nut shell, people are freakin’ out.
• Our current state is unlike anything anyone has ever seen before (60% of people own stocks in some way, there are trillions in derivatives, and debt levels are unprecedented). If you are participating the last 2 months, or even just watching while sitting in cash, you are feeling the frustration, fear, losses, and depressing wonderment of what the heck is going on and when and how will it end or just abate somewhat. One thing is becoming obvious, Ms. Market is going to make sure as few people as possible are on board whenever we do see a monster rally (yes, there is one out there).
• In the most dangerous market ever, we can try anything as long as we are disciplined and define the risk. My positioning the last few days is not an all or none last stand…we are diversified and have protective stops. I am willing to risk 3-7% here and there in an effort to make 20-30%.
• One month T-bills now yield .02%. This means $1 million in a 1 month treasury will earn you $16. Seriously, I would rather bet $16 on a football game this weekend. 3 month treasury yields are now a paltry.14%. This means $1 million in a 3 month treasury will earn you $350. I don’t know about you but I would be happy to take a loan for $1 million for the next 3 months and double that return and pay someone $700.
• Please preserve some capital by not going all in and just closing your eyes and hoping for the best. The declines we are seeing this year make the crash of 87 seem like a walk in the park. There will be a day when we can make 3, 5, and 10 times our money (in numerous options)...but you must have some money left to participate.