Presidential Euphoria

From "Key Turning Dates":

"Almost two years ago, I alerted to expect 2007 to mark an historic high in the stock market. My rationale was based on the fact that 2007 would mark the anniversary year of many major market peaks. The year 2007, I wrote, would mark the 200th anniversary of the major high of 1808; the 170th anniversary of the peak and crash of 1837; the 100th anniversary of the high of 1907, which was followed by the "Rich Man's Panic" of 1907; the 70th anniversary of the high of 1937, which was followed by a crash; and the 20th anniversary of the peak and crash of 1987. I also pointed out that 2007 marked the 400th anniversary of the beginning of public trading of shares of stock, which occurred in Holland in 1607. I explained at that time that markets recognize anniversary dates because they are governed by mass human psychology, which is mathematically ordered. The "collective unconscious," as explained by the Swiss psychologist Karl Jung, supercedes news events, no matter how dramatic they might be.

Well, we can now see that the year 2007 indeed marked a major high in the stock market, and I believe it will be seen in retrospect as a high as significant as that of 1929. The crash of 1929 lasted into 1932; but I think the crash that began in 2007 will last longer, perhaps as long as 8 years or more. As of October 10, one of our turning dates, the Dow Jones Industrial Average had fallen from a high of 14,200 on (October 11, 2007) to a low of 7,882. Notice the one-year anniversary date? The major high and (thus far) important low were almost exactly one year apart. This is about a 45 percent decline, almost equal to decline from 1973 - 1974, and the largest decline (thus far) since 1929 - 1932.

The 1973 - 1974 market plunge was accompanied by a very steep recession. And we are seeing a recession set in as the current decline unfolds. But there is something different this time around: unprecedented levels of debt at the consumer level, the corporate level, and most certainly at the federal government level.
And the meltdown in the subprime mortgage market has brought down a number of Wall Street institutions. It is this deleveraging of debt that is the real long-term culprit for the U. S. and world economies. The vanishing liquidity has occurred at a breathtaking pace. Right now, it appears that the credit crisis has subsided;but rest assured, it has not. It will return with a vengeance at some point. That is the way markets work, of course. They ravage investors and then stage interim rallies that can last for long periods of time. These interim rallies, of course, lull most investors into a false sense of security, making them unprepared for the next downturn. "

As a new President takes over, and 8 years of hell end, I believe the market may now be a ripe buy for good blue chips, for traders willing to now hold for the long term. I continue to believe the "best is past" until all supply side economics stops it trickle down, and more subsidized programs and tax shifts develop a country with more distribution of wealth. Is it right? No. Is it necessary? Sadly, yes.

Yesterday, on Presidential euphoria, the market hit highs of 9693, and lows of 9283. The Nov480C was sold to top profits of 19.50, from the prior day buy, and we're now holding only a December put, for what should be a "two way trade" potential as the market now reacts to who wins, and what will happen next.