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Paul Farrell: Stock Crash By Year-End 2013 (87% Risk)

Wednesday, June 5, 2013 - 4:31 PM
From MarketWatch.com:

Doomsday poll: 87% risk of stock crash by year-end - Paul B. Farrell - MarketWatch

This is the only "good news" of the day, with stock market tanking today.  Mr. Farrell collected all the gloom-and-doom sayers and made a bold prediction in this article.

The nice thing is that he was never correct in terms of timing predictions; definitely much worse than a broken clock (correct twice a day).  Thus I am happy to report that "there will be no stock market crash in 2013 (Risk of crash is 13% from Contra-Farrell analysis)!"  :D

Be sure to read all the entertaining comments from readers.
5
51hh51hh1,476 posts since
Jan 16, 2010
Rep Points: 6,426
1. Wednesday, June 5, 2013 - 5:04 PM
'Even a blind squirrel finds a nut once in a while'
7
ShorebreakShorebreak2,603 posts since
Apr 6, 2010
Rep Points: 14,091
2. Wednesday, June 5, 2013 - 7:06 PM
Anyone remember "Wall Street Week with Louis Rukeyser," on PBS every Friday evening. Among the featured analysts on Rukeyser's show was "permabear," or should I call her more affectionately "Momma Bear," Gail Dudack. She was distrustful of the frothy stock market of the 1990s, and was perpetually bearish, expecting the bubble to burst at any time. Rukeyser famously "fired" her just months before the market peaked in April 2000, and of course as we know from hindsight, just months from the bursting of the internet bubble and the grueling bear market that followed. From 51hh's post, it seems we now have a "Pappa Bear" in Paul Farrell. Will "Pappa Bear" prove as prescient in 2013 as "Momma Bear" was in 2000? Stay tuned.
3
WilWil242 posts since
Feb 26, 2010
Rep Points: 1,281
3. Wednesday, June 5, 2013 - 7:14 PM
Re: Wil @ 2. Wednesday, June 5, 2013 - 7:06 PM

"Anyone remember "Wall Street Week with Louis Rukeyser," on PBS every Friday evening?"

I used to love that show. Thanks for reminding me of Gail Dudack.
5
ShorebreakShorebreak2,603 posts since
Apr 6, 2010
Rep Points: 14,091
4. Wednesday, June 5, 2013 - 7:34 PM
This is the same Farrell, who predicted never-ending bull market; until the bear hit him hard on his face.  Then he changed his position to predict bear; well; guess bull will continue to hit him in the face this time.

My Contrarian Theory: When the majority of the so-called experts predict a bear, this is the perfect time to stand in the bull camp.

If Farrell is even sightly smart he should switch bull/bear position on a daily basis; just to keep those dumb readers on their toes. 
3
51hh51hh1,476 posts since
Jan 16, 2010
Rep Points: 6,426
5. Wednesday, June 5, 2013 - 8:36 PM
The vast majority of analysts and pundits remain bullish on the markets at this time. The SPX Volatility Index (VIX) is at 17.50 today. Not exactly bearish at all.
5
ShorebreakShorebreak2,603 posts since
Apr 6, 2010
Rep Points: 14,091
6. Wednesday, June 5, 2013 - 8:39 PM
Please excuse me if I just, well, stand there (as Jack Bogle recommends). Observe your AA and re-balance as necessary; otherwise, tune out the noise.

I should note I actually (gasp) did a mid-year re-balance in late May and sold some equities to get back to my AA.
3
BozoBozo137 posts since
Feb 14, 2011
Rep Points: 937
7. Wednesday, June 5, 2013 - 9:34 PM
Hey Bozo,

What is your recommendation for, say a 60-year-old person with five years toward retirment?  40% in equity/60% in fixed income?  Does that vary with your prediction of the stock market?

TIA.
3
51hh51hh1,476 posts since
Jan 16, 2010
Rep Points: 6,426
8. Wednesday, June 5, 2013 - 10:34 PM
To: 51hh

I would most assuredly recommend "age-in-bonds" as a default position for anyone at or nearing retirement. I attempt to re-visit our portfolio at least once a year, twice if warranted, for re-balancing.

Many hints and wrinkles over at the Bogleheads forum with regards to re-balancing. It does not necessarily increase your return, but it does reduce risk. And, for folks of a certain age, reducing risk is what it's all about.

Yours,

Bozo

 

 

 

 
6
BozoBozo137 posts since
Feb 14, 2011
Rep Points: 937
9. Thursday, June 6, 2013 - 7:31 AM
Hey Bozo,

What is your recommendation for, say a 60-year-old person with five years toward retirment?  40% in equity/60% in fixed income?  Does that vary with your prediction of the stock market?

TIA.

I don't think an allocation just consisting of stocks and bonds is sufficiently diverse. Fall 2008 amply demonstrated that point, though I admit that bonds recovered faster than stocks. Sometimes stocks and bonds move in the same direction at the same time. That's why there is a place for gold and other commodities, convertible bonds and preferred stocks, foreignn currencies (Swiss francs, anyone?), closed end funds, and even our humble, though not very well yielding, CDs. Just don't allocate too high a percentage to these more "exotic" assets. There may even be a place for flexible premium deferred annuities. I think this more "enhanced" asset allocation becomes more important as one gets older, when one would have less time to "ride out" bull/bear market cycles.

P.S. I also think it is prudent to consider market conditions when investing. While I don't think most people, even professionals, can accurately predict market conditions over the long haul, nevertheless to invest wearing "blinders" when it comes to market conditions seems senseless to me.

Later: 51hh, thanks for reminding me! I forgot about REITS and real estate as an asset class. What an oversight! Add MLPs to what was forgotten, too.





4
WilWil242 posts since
Feb 26, 2010
Rep Points: 1,281
10. Thursday, June 6, 2013 - 8:30 AM
Shorebreak:  I can't believe how much I used to have to listen to "Wall Street Week" with Louis Rukeyser.  I think I had a "thing" for him.  Gayle Dudack never did it for me.  It was one of the reasons I decided to buy our first and only mutual fund.  It was the only thing I ever lost money on so it's long gone and so is my desire to ever buy stocks in any way now. 
3
paoli2paoli21,367 posts since
Aug 10, 2011
Rep Points: 5,992
11. Thursday, June 6, 2013 - 9:49 AM
Bozo: Thanks for the "age-in-bonds" recommendation.  Does it mean bonds with various lengths of maturity?  So you do not recommend any equity coverage?

Will: Thanks.  I agree with you, we need to diversify into other options; I can think of gold and real estate.  I do not risk into select sectors (e.g., bio-tech, energy, consumer staples) though.  My theory is: If I find a steady Eddy like FLPSX, I am good to go (as core fund).  I do not tuch bonds at all (I do not like the movement, complexity, and mystery -- never can spell it right). 

Paoli2: You may give a solid mutual fund a try; it is less volatile and risky.
3
51hh51hh1,476 posts since
Jan 16, 2010
Rep Points: 6,426
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