I would like to add my thanks for an excellent article, as a technical analyst using trend reversal indicators (similar to DecisionPoint) my interest is the asset’s trend regardless of historical tendencies. My original challenge was in minimizing the number of false alarms generated by my indicators. Now that my indicators have improved significantly, my challenge is the allocation of investment funds at any given point between signals as they apply to various asset classes.

The Japan scenario or the ’30-’32 scenario is where I think we’re headed, depending upon the Fed’s actions. Either way is terribly destructive to your wealth if invested buy and hold, needless to say.

And I’m not convinced that the March lows will hold. It’s just too dangerous to buy and hold without a secular updraft behind you. And we’re a long way from that.

That said, I do think we have to be on guard against the possibility of high inflation. But I don’t think we’re there yet. The herd (including some respected namesm, no doubt) is ahead of that trade, IMO. And holding inflationary hedges through another bout of large deflationary pressure will be nasty, as it was last year.

Tough times, indeed.

How selfish of me. I think my wish has hurt my karma and jinxed my investing.

Ninety percent of the population (except maybe retirees) is hoping for high inflation to wipe out their debts and is praying that Bernanke can reflate the equity markets and home prices go back highs since they have practically no real savings.

Thanks as always for your great commentary. My personal problem with buy & hold is that I don’t think the market forecasts out more than a quarter or two ahead. No one really know what is going to happening a year or more out. There are lots of guesses, but no one really knows.

In an environment such as this there is the potential for a Japanese outcome. This is a highly unusual economic event. It is a game changer. With my money, I would prefer to play the short term trades (which has served me very well over the last few years) as opposed to holding and hoping.

The odds in this environment favor an investment duration that is consistent with a high risk environment. Otherwise, you’re just a feather in the wind hoping the winds take you to your goals….

If you believe that March 9 marked a fundamental low which will not be broken, why not just stick with buy and hold from then on out rather than trying to time the market’s future ups and downs?

I almost completely exited the market in October 2007 (lucky bet, but based in my intense fear of loss which is stronger than my fear of lost opportunity) and bought in March 2009 (but only 75% of normal allocation to equities). I then sold most with the market near 900 and froze when the market jumped higher in July. I then bought back in at about 990 (50%) on the same Friday you announced that you sold. (I bought because of dollar issue. I have been afraid my dollars are going to hell and a Euro bank account which earns zero interest and foreign stocks are my only currency hedge.) I have been waiting for a significant correction which will never come. I would be much happier today if I had just bought in February/March to hold forever – even if the market makes new lows eventually.

I missed about 20% points of the rally overall. I am now hoping the market goes back down to let me recoup the missed opportunity. I am afraid to invest more at this level, but afraid also that the market will suddenly jump much higher. If I were simply fully invested from March on I would be happy to sit back and watch the market go up or down. Being a “spectator”. This time fully invested.

Psychologically I can handle losing paper gains (investing low – watching the market go up and back down), but not investing money sitting in cash and taking signficant paper losses (watching the market go down even if I am convinced it will go back up).

My seach for what to do next lead me to start reading your site (which is great) and has led me to some great sources of wisdom which I never knew existed (e.g. GMO’s Grantham)

The Adminstration and FED are playing a dangerous game of chicken with the currency and commodity markets. They are throwing the kitchen sink in terms of stimulus at the economy, despite evidence that it’s not working and without regard to how its trashing the dollar. The only reason that this continues is because the bond market is firmly in the deflationist camp. At some point, spiraling deficits will reverse the bond market’s thinking and cause yields to rise. at some point, we are going to have another black swan event because of a convergence of higher interest rates, a collapsed dollar, higher oil prices, and the next wave of defaults. Underlying all this will be ill-timed health care initiatives that pile on more debt and intractable unemployment that hasn’t budged because our economy has no non-boom industries that can drive organic, non-public sector employment.