Back in..partly

Posted by: Michael Mandel on October 17

In case anyone is interested, I moved some money out of money markets into the S&P 500 today. Not all the way back in…but part of the way. (My last market move was in mid-december, when I moved about half my portfolio out of stocks.)

My reasoning is that the size of the debt problem is enormous but finite…I’ve been estimating roughly $3 trillion for the U.S., with a somewhat larger global number. Investors have seen roughly a trillion dollars in write-offs, the government has pumped in roughly a trillion dollars in bailout money, and the market is pricing in a recession which will cut back consumer spending by about a trillion.

So even if the market and the economy keeps going down for a while (including today!), this strikes me as a good time to invest.

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Reader Comments

Kartik

October 17, 2008 01:55 PM

I agree. While I said the S&P500 would be a good entry point at 1160, it is presently below that (973). But I still think this is a good time to buy.

Joe Cushing

October 17, 2008 03:02 PM

Congrats on the market timing. Some say it can't be done but others have proven it can be done. It's not that it can't be done--It's that most people can't do it.

Mike Mandel

October 17, 2008 04:24 PM

I make no predictions about the future. But at least I am public about my actions.

Rycoka

October 17, 2008 09:04 PM

From my perspective it looks like the only people making money in equities at the moment are those with enough information to stay ahead of the curve on as the market bounces down.

My gut feel at the moment is that the government intervention will be fundamentally inflationary (the governments don't actually have the money to cover the debt so one way or another they are going to be devaluing their currencies by getting involved) and that will be the problem going forward. On that basis it would certainly be worth starting to look at getting out of cash. Maybe the gold bugs have a point, but I'd be more inclined to invest in organisations that are providing necessities, maybe agribusiness?

Joe Cushing

October 20, 2008 01:19 AM

I've been thinking about this over the last couple of days and have thought that brings up a question.

What about credit card debt? Don't we have another quarter of losses due to the default of credit card debt? I don't know the numbers associated with this debt. How does it compare with the mortgage melt down? Could it bring down the likes of the two largest credit card debt holders, JP Morgan Chase and Bank of America? If not, could it bring down others and still send the market on a tale spin? Maybe a 50% loss is the bottom. Is this part of why you didn't put it all back in? Are you waiting to see what happens with credit card debt?

Thank you for your interest. This blog is no longer active.

 

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Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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