A comment I made on your post of yesterday morning in which I said I needed to be careful with my capital while I try to make profitable trades inside this mess resulted in a post that remarked that I was the face of capitalism at it's finest.

So it has started.

I've been warning friends, family, the government and my clients for years of the coming car crash. In fact, I've missed out on some trades because of my caution.

Now that the inevitable is happening and I'm thinking clearly and profitably rather than in a panic, I'm being called names.

It figures.

Keep giving good advice Toddo. I'll be listening.

I have preserved capital, I have no debt. But to preserve my capital I am in CDs at FDIC insured banks.

I read about the 2.6 Trillion on deposit at FDIC insured banks and the 35 Billion the FDIC has to cover those deposits and I wonder what the hell I should do now.

Do I pull it all out and bury it? Is the only safe haven a hole in the ground?

I am scared and I admit it.

Susan,

You are suddenly looking into the abyss and wondering what to do. Even if you bury your currency, that doesn't prevent the devaluation of the currency itself.

This problem is exactly why Gold, Silver and to a lessor extent gems have always been considered safe havens.

But the metal markets are a wild ride as well. And if you don't take delivery of the actual metal, all you have is a paper certificate declaring your ownership. I have reason to believe those paper certificates will not be worth much if the "you-know-what" hits the fan.

Look at what Gold is doing today. This should have happened weeks ago.

I started reading Minyanville a few years of years ago. Quite possibly the best investment decision I have ever made. I went mostly into cash. I took flak from many people as I talked about the trouble brewing.

The capital preservation mantra has served me well. Best of all, Minyanville has been able to explained how the whole system functions without needing to be a derivatives trader.

So thanks for all the good work here. Best site I have found.

Todd (the other Todd :)

todd,

great piece because it chronicled how we got to be where we are... it all looks so linear in your presentation, but as i've heard you and others say, markets are not linear... they are multi-dimensional however, and dimensions that don't normally show up on a chart (liquidity, volatility, psychology of both investors and governments) have a lot of sway over the price-time construct... the events that have been guideposts through this process should make that clearer to everyone...

thanks for the vibe

While I have not been one of the biggest supporters of the viewpoints in these columns, I feel that it's in the best interests of everyone to point out realities.
Eventually, even bears are going to be right, so if you bang the drum long enough, you get to say "see I was right". This doesn't mean you were ever wrong, nor does it diminish the value of the commentary leading up to the events you were "right" about. But it does draw into question a number of other things, like timing and whether or not there are certain self-fulfilling events which took place along the line. A stopped watch is a self-fulfilling prophecy, as it will eventually be correct.

I would say that the value in your commentary isn't in the prophetic nature of it. As a trained economist, it's rough to hear people say economists can't predict anything, so it's not a science. Well, actually science is about explanation, not prophecy. Sometimes explanation can lead to the ability to predict events, and that's valuable. But what's more valuable is understanding why things happen.
Which is why I like reading articles that I don't always agree with 100%. They add to the ability to explain - more information is more power.

I still believe that a large portion of our current undoing is the mass media. We constantly view talking heads who have very little to say except "things are great" or "things are a mess". They are fond of saying "we've never seen this before" even though just about everything we've seen here in the last 10 years is not original...it's just unusual and atypical.
By the same token, bull markets become bubbles when the "word" becomes "there's no end in sight" and bear markets become panics when the "word" becomes "the bottom has not been reached". In either case, the "word" is wrong, so the market overshoots.

As a result, the "word" should always be OPTIMISM. That is, prepare for the worst, expect the best. When businesspeople (and I've seen this quite a bit the last 5 years) prepare for AND expect ONLY the best, they make rash decisions and wind up firing good people because "expectations weren't met".

This kind of absurdist behavior leads to the events we are currently seeing - people who led companies into the abyss walk away with huge pay packets while someone who was excellent but "didn't meet expectations (which were absurd to begin with)" are walking away in tatters.

At this time, it's hardly valuable to keep tooting one's "I told you so" horn. I know that wasn't the intent of articles like this, but it's really not a worthy thing for the reasons I pointed out earlier - stopped clocks.

For years, I've been telling my retired inlaws to exit the market, only to be told that a new high was just hit so what do I know? Well, I know they are retired and need their cash, so why risk it even if new highs are being met? Regardless of economic underpinnings, it's just sound planning.
Today, I refuse to say "I told you so" and am helping them find ways to improve their current results. But in this environment, that is difficult. Typically, I'm telling them CASH.

I find that kind of article or commentary to be far more useful than "see where we were" and "we talked about all this". Sure, you did. But it took forever to get here...and as my inlaws would point out if I were to say this to them "what good does that do me now"?

Not only that, I also believe that past results are not an indication of future performance. I could be wrong AGAIN if the market were to (very unlikely) suddenly shoot up 5,000 points. But I haven't been in that camp, anyway. I've always pointed out that just because the downside risk exists doesn't mean it has to result in a crash or panic.

Crashes and panics occur when too much unpleasant misinformation follows on the heels of good information that was bad. The flip side, of course, is that bubbles form when too much pleasant misinformation follows on the heels of good information that was good. This makes it important to frame discussion points adequately, point to avenues of behavior for various standpoints, and fully outline risks.

Richard, I like the way you frame economics as having the virtue of making events understandable, rather than predictable. Those who are observers of the sciences don't seek the knowledge at the heart of the discipline, but rather the products or processes that come out of it. Any science that is short on product and ill defined on process will only be sought after for its predictive value. It is my oversimplification, but all the sciences are marked this way by outsiders. If regulations in business were used in a predictive way, perhaps we would hold them in proper esteem and the pendulum would narrow its arc.

I say to everyone go to your local bank tomorrow and demand to withdraw in cash whatever you can from your account. it's your money and if you don't withdraw it now, you will lose it!!!! the banks after all are just another business and if they go bankrupt, you go bankrupt. by having money on deposit with banks we are essentially lending them money. what do we get for it? 1-2% interest and no guarantees we will ever see it again. what do they lend it out for? 5-6 % and they're still losing money. they will tell you everything is okay until they have sucked everything out of you that they can, then they will admit they have no problems, need federal assiatance or else will file chapter 11. how many examples of aig do yuo need to know this is true? go to the bank tomorrow and withdraw $5,000. If we all do this, it may start a run oin the banks and bring this crisis to ah ead rather than the slow bleed it is.

you are going to lose it all of course. how stupid can you be? the banks will continue to tell you all is okay while you leave your money on deposit with them (for 2-3%? while they lend out at 5-6%!) but in fact they are using your money to reduce their debt. in the end, after they have filled their pockets, they will throw up their hands and ask for federal assistance and/or file chapter 11. they don't care. they've taken care of themselves. today several money market funds are at less than par value (i.e. $1 = 1 share). this is only the beginning because as more banks fail, the money market holdings will be adversely affected. there is no safe place except under your mattress. I say go to the bank tomorrow and demand to withdraw half of your amount on deposit, IN CASH, whatever that may be. tell them you won't accept a check because you don't trust their credit. then let's see how many of them actually pay up. my guess is that very few will. but we had better learn this now rather than next week or the week after when it has gotten worse. i'm planning on doing this tomorrow (I will withdraw $20,000 in cash) and if they balk, I'm calling the local news station with the headline that banks aren't able to refund your deposits in cash.

Thank you, Walter.

I believe investors who are scared, at this point, are forgetting the lessons of the past. Fear is what undoes us. A few months ago, I posted the Rudyard Kipling poem "If" in the commentary section for one of Todd's opinion pieces. I can't remember which one.

However, I will say that the key to the poem is keeping your head when all around you are losing theirs. Investors have a hard time doing that when program trading triggers massive sales. Well, when program trading triggers massive buys, why don't we lose our head? Because it's going in the right direction? That's pretty silly, because it's just another overshooting situation. But overshooting carries with it the seeds of reversal. So we should fear the large upward shifts and take advantage of the large downward ones.

Today, that seems difficult. The market still isn't "fairly valued" by some people's expectations. Well, if you look at the last 2 true bottoms in 1932 and 1974, the true bottom today is probably 7,500 or so. So, no, if you're going by that we're not at the bottom.

But we are below the mid line of expectations. And regardless of where things go from here in the near term, we do spend the vast majority of time in this current range.

Does that mean things are a screaming buy? If you have the cash, sure. There may be more short term pain, but it will be worth it.

I am not scared, but fear is only the manifestation of our inability to make sense of our surroundings. We've been here before, we just don't remember the last time it happened because we tend to have short term memories. I am not scared because I do remember, and furthermore I believe that courage is the ability to forget your fears and do what you have to do. Courage is far more important today than fear.