The Dow Jones 30 is down 10.8% in 19 trading days which is not so extreme, but this week definitely qualifies as "crash-like". The 2cs is 204 tonight which is a crashy number, but nowhere nearly as crashy as November 21, 2007 when it was 461. It was 234 at the March 2009 low.
The suggestion that some indicators were mostly likely hinting of a shallow correction was incorrect. As I said in a comment the other day, I don't trade indicators. I use them as mood or sentiment pointers. I follow my instincts, and I try to buy lower and sell higher. I was never hugely long of stocks, and I trimmed way back as I noted on several occasions. Nevertheless many different assets have a tendancy to trade in sympathy with generic index stocks these days.
I have not been a believer in Treasurys, and I have been a believer in gold, so both of those positions have been negatives for me the past week. My total accounts made their high of the year last Friday (May 14, 2010) at +5.61% in nominal dollars or + 19.18% in dollar index-adjusted dollars. As of yesterday I was down 2% from last Friday's high and was probably down another 1-1.5% today. For me that's a lot of volatility, and it's mainly due to gold and the oil & gas trusts. I'm still adding to "paper gold" trusts CEF and PHYS on big down days which has been my plan for quite a long time.
With commodities all down hard plus gold too, and with the long Treasury bond futures back above 124 today, the story is laying out the dinner table for deflation as in 2008. Regardless of my views or anyone else's views on "flation", the specter of sovereign defaults in our new age is very, very plausible, just as goldbugs and "Austrian" economists have always maintained. The defaults are likely to come sooner than later if deflation actually occurs, as Ben Bernanke would be the first to tell you if you asked him. That's because negative real rates just rub out any possibility of repayment of positive rate debt coupons. That's why inflation is the preferred option even when it isn't an actual option. This is why I believe that gold is invaluable as insurance no matter what else happens.
On an entirely different subject, someone sent me a splendid article on Roth IRA conversions today. I wrote about it here several times over the past two years, but this paper by Shelby Smith brings up a lot of very practical issues and talks about some benefits and ways to use Roth's that I hadn't been aware of. Definitely worth a read if you have ANY interest in taking advantage of the 2010 one year window of unlimited total dollar conversions.
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