Michael Belkin is telling his clients to bail on the stock market --

[Emillereid]

SuperModels
Market prophet is battening the hatches

Analyst Michael Belkin called the bubble, the crash and the rally. Now he's telling his clients to bail. Here are his long and short strategies for a December downturn.

By Jon D. Markman

Rumors of the imminent death of the 2003 stock-market rally have been greatly exaggerated time and again in recent months. But according to one analyst with an enviable track record, the end days are finally here, and it’s time to prepare for a sickening plunge into December and beyond.

The doomsayer is Michael Belkin, one of the few investment analysts who has emerged from the recent boom, bust and re-boom markets with his reputation not just intact, but aglow.


Most independent researchers build careers as all-bull or all-bear, but not this guy. Operating out of a home office on Bainbridge Island in the Puget Sound near Seattle -- about as far from Wall Street as you can possibly get and stay in the continental United States -- Belkin writes a $36,000-per-year weekly report on equities, bonds and commodities for leading mutual-, pension- and hedge-fund managers worldwide. The report rises above the straitjacket of specialization to treat the global landscape holistically as an interlocking economic, political and social system.

Two weeks ago, Belkin abandoned his yearlong (and initially very lonely) bullish posture and put on the fur. He expects the broad market indexes to sink significantly through the end of the year, led by cyclical industrial stocks, and does not see much of a recovery on the horizon for 2004....

Whe I read this and take it together with Warren Buffet's recent cautionary words concerning the stability of the dollar, I don't know what to do. Those of you who understand finance -- longs and shorts and that sort of stuff -- if this guy is right, what should a person do. Should I sell my mutual funds and stock and put the money in a savings account or something. Should we be selling the house? I lost a lot (for me) of paper money when the tech bubble burst and don't want to lose what little I have left (I own Cisco, embrex, mutual beacon, oppenheimer main street something, janus mercury, Franklin some kind of bond mutual fund).

[kstewart33]

1. Link please?

[cosmicdot]

4. link here

http://moneycentral.msn.com/content/P62345.asp

[w4rma]

7. link and a related link

Market prophet is battening the hatches
Analyst Michael Belkin called the bubble, the crash and the rally. Now he's telling his clients to bail. Here are his long and short strategies for a December downturn.
http://moneycentral.msn.com/content/P62345.asp

Readers want to know: Rally or no?
Markman updates analyst Michael Belkin’s call for a fourth-quarter downturn and answers readers who think it’s all doom and gloom from here. Plus, he defends his defense of China.
http://moneycentral.msn.com/content/p58388.asp

[livinontheedge]

2. This is totally bogus.

What a scam.

[cosmicdot]

5. what's a scam?

[hang a left]

11. Ok if it is, where is your argument ?

[Skittles]

3. yes, EM, I need the link, please!

!

[dreissig]

8. Here's the Link

http://www.thestreet.com/funds/supermodels/10121439.html

[qanda]

6. I found this from google news

I'm not so sure it's a scam:

http://moneycentral.msn.com/content/P62345.asp

[TNDemo]

9. Question from an econotard.

I have limited understanding but I thought that usually when stocks went down, bonds would rise. I noticed in the article that bond selling is going on. Is that because stocks are rising or are people dumping them in preparation for bad times? I guess my question is if you take this prediction seriously, do you dump bonds as well as stocks?

[denverbill]

13. It's impossible to say.

Bond prices can fall because more people want to sell on a given day than buy (sort of), or because the fed raises interest rates, or because another country raises interest rates.

Stocks and bonds aren't directly tied, but frequently, big investors who want to move into safer assets will sell stocks and buy bonds, which would tend to push up bond prices and lower interest rates. On most given days, if stocks are down, bonds are up. That is not always the case however. There are cases where interest rates are rising and stocks are falling. In that case you are sorta screwed either way. And if the dollar is also falling, even money market accounts or savings accounts aren't totally protected.

[TNDemo]

14. Why would a money market be affected?

As far as the principal is concerned?

[denverbill]

16. The principal wouldn't be affected.

If you invest $1000 in a money market account, you'll get $1000 when you sell the shares. However, if the value of the dollar has decreased so that a dollar now only buys 90% of what it used to, you've effectively lost $100 in purchasing power.

Buffett sees the enormous trade deficit and budget deficit eroding the value of the dollar against foreign currencies. I can't say I disagree with him, although I have yet to put my money where my mouth is like he has.

[denverbill]

10. It depends a lot on your situation.

I know quite a bit about finance, longs, shorts, etc, but I'm not a financial professional. What I do know is that the investments you should hold depends a LOT on your life situation: are you nearing retirement, do you have plenty of liquid assets (things that could be converted to cash easily like savings accounts, money market accounts), etc.

I got absolutely killed by the tech bubble too, but I haven't really changed my investments since then either, since I have at least 10-20 years til I retire.

Warren Buffett is one smart financial guy. One thing I might suggest is you could sell your Cisco and buy some Berkshire Hathaway (BRKA or BRKB). BRKA is selling at $80,000/share but BRKB is only $2650/share so that might be more possible.

Again though, I'm not a financial advisor.

[Emillereid]

18. Unfortunately I am closer to retirement than you --

and most of our assets are not that liquid. What is Berkshire Hathaway -- I've never heard of any stock costing that much! Do you think our mutuals are ok?

[Capn Sunshine]

21. Berkshire is Warren Buffets holding Co.

He refuses to play Wall Streets dilution game so he never splits or issues more shares. He did issue a "small investor" class of Berkshire, BRK.b which is more affordable.

[northzax]

22. Berkshire Hathaway if Warren Buffet's

holding company.

[denverbill]

24. I really hate to advise you. I'm not a professional, like I said.

Most investment advice I see reccomends gradually moving from stock mutual funds to bond mutual funds and cash (or money market funds) as you get closer to retirement.

Of the things you mentioned, I know Cisco and I actually own Janus Mercury. Individual stocks hold the highest risk/reward, and a tech stock like Cisco is especially risky.

For a mutual fund, Janus Mercury is also pretty risky, although less risky than an individual stock. If you've held Mercury for more than 4 years, you know how much it dropped from it's high, but you also know that it had a pretty good run from it's start point too.

The other funds and stock I'm not familiar with honestly. Most mutual funds are safer than individual stocks because of their built in diversity, but stock funds are not protected from risk, as you well know.

The stock market is near it's high for the year this year, but it's still lower than it was each of the last 3 years. It might be 11000 next year, or 8800 for the high. I don't know.

I would strongly recommend that you consult a financial advisor however. If you have a 401K at your employer, they might be able to assist you. Or if you have an account at a brokerage. Or even a private financial advisor if you can afford it. There are also sites on the web like this one.

http://www.mfea.com/InvestmentStrategies/Retirement/default.asp

[noonwitch]

12. I know nothing about the market, but I do know this:

If people don't have much money to spend at X-mas, they won't be buying as much stuff. If retail takes a hit over the holidays, it won't be good for anyone in the long run in 2004.

[amazona]

15. if the man could call these plays...

...he wouldn't need to sell a newsletter for $36,000 per year.

The best thing to do with news from or about newsletter writers is to ignore it. All newsletters telling you how to time your buying and selling of stock are scams. All of them. It has been proven by decades of study that no one can do this. A monkey with a dartboard makes just as good of predictions as the newsletter writers.

Even Warren Buffett isn't Warren Buffett any more. And for sure this guy never was.

A friend of mine sold a rather well-regarded momentum system and he kept it going for a good many years but, in the end, what happened is what math and science tells us must always happen -- he lost all the investors' money and all of his own.

If you want an investment with a mathematically proven return, you may count cards at blackjack. But you're not going to get it with equities. The entire argument for investing in equities is an historical argument based on looking at the market from 1920s through the 1990s and saying your investment will grow on average 10 percent a year -- ignoring the hundreds of years that the markets existed without growing at all and ignoring the fact that most of this growth occurred in a total of less than 180 days and that NO ONE (despite all the newsletter writer's claim) picked those magic days in advance. Equities involve risk. They are gambling. We are forced to gamble because it is not possible for most of us to earn a high enough income to fund our retirement. So we have to "invest" and hope for the best.

All looking at the newsletters will do is keep you confused and anxious. Every newsletter's arguments sound "logical." Unfortunately, "logical" is not the same as mathematically correct. It is "logical" that I can play dice and pull my money off the table when I'm winning and guarantee myself that I will always come out ahead in the end. Unfortunately, the mathematics proves that I can't actually do this, no matter how "disciplined" I am in following the system -- inevitably, in the long run, I lose. "Logic" is not "math."

Just because an argument sounds good doesn't mean it is good.

Don't read investment newsletters.



(apologies for the length of this rant)

[tkmorris]

20. He doesn't

He does not "need" to sell a newletter for 36k a year. He's doing just fine thank you very much, and he is doing fine because he has been able to predict market trends more accurately than just about anyone.

Is it superior knowledge? Blind luck? Who knows. His record is good though, no one can argue that. That is precisely WHY he gets that much for an opinion.

By the way math is absolutely logical. In fact it is nothing but. Furthermore, the markets are not a dice game. And finally, a system of playing dice which supposes that you will always be "up" at some point in the game isn't logical, it's just plain silly.

I don't mean to be terse but I gotta run. Seeya.

[northzax]

23. well, he would need capital, right?

I mean, you gotta have money to make money.

And while I have no idea if this guy is any good or not, the fact remains that some people are better at reading the markets and making money than others. And yet, in your pure mathematical system, it is impossible for one person to be any better than others. is the entire thing based on luck?

[Emillereid]

17. Sorry -- I forgot to paste the link!

http://moneycentral.msn.com/content/P62345.asp?Printer

[sandnsea]

19. Diversify

That's all I ever hear. Where to put some of your money? No idea. Maybe bonds because interest rates will probably go up. But I honestly have no clue. But this guy is good, I'd just been thinking about looking for his take on the economy. I think I'll try to google up his name and see what else he's had to say.

[doppledang]

25. Look who's talking

If you never heard of him before, he's just lucky. 10,000 analysts, someone's gonna hit the right inflction points. I'd say hold, or, if you're way too strongly into NASDAQ stocks, diversify. Don't panic.