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Financial Market Wisdom From Bernie Madoff

OK, you're tuning in to the Madoff Channel because you know that I've seen more stock market ups and downs over more than 50 years than most folks. And, if you've navigated various updates I've made here and via my Twitter account over the last 7+ years during times of market upheaval and capitulation, you know that I've posted trade ideas with respect to individual stocks, gold, oil and bonds and 99% of my market calls have paid off handsomely for those who acted upon them.

But, since many still refer to me as Midas Madoff you want to know what I think right now, and you're busy puking up blood thanks to overdosing on the CNBC Cartoon Channel. I don't blame you. That said, and with the caveat that past performance is no guarantee of future performance, I must first insist that you look back over my postings here to better understand the process that I use to trade profitably.

For example, at the end of August, in the midst of the market meltdown, I expressed a voice of reason and for those who had balls, they bought either major stock indices when the Dow was hovering around 16,000 and/or individual names NOT in the energy sector and names that paid nice dividends and were otherwise able to withstand the upcoming recessionary cycle. I also cautioned that if the Dow closed noticeably below the 16,000 level (or if S&P closed below its equivalent long term trend line, all bets were off and there was a high risk of additional 10% decline from that 16,000 level. Now, many people refused to embrace the "R-word", but they did follow my suggestion and then watched the markets trade back up nearly 13% within a matter of weeks. Hopefully, you have been following my subsequent updates via Twitter to know that I've remained very skeptical of current equities prices--and I've argued that we had entered a likely bear market as early as Q2 of 2015...

At that same time in August, the price of oil, as expressed by WTI was in a free fall. At the time, it was in the $38 area and hedge funds were trying to talk it back up to the mid 40s. I suggested that it would be wise to wait until crude traded down towards 32, and if it traded as low as $28bbl, folks should take out mortgages on their South Florida condo's and get themselves a tanker so that you could back it up next to a refinery and fill it to the brim. Well, I know two folks who did just that and then sold it back out when March NYMEX oil futures traded back to 32 within a few days.

Now that I've established my bonafides, I'm of the opinion that despite today's bounce from being down 400+ to closing down only 180+, we haven't seen real capitulation just yet. And, now that hedge fund geniuses are publicizing being long of investment grade credit default swamps--meaning they are betting that the best corporate bonds are at risk of falling out of bed, and coupled with the fact that Fortune 500 CEOs are back in the mode of "must cut the fat and make no new investments"--that kind of shit thinking inevitably results in a recession.

There will be great buying opportunities in the upcoming several months. Keep your powder dry, do your homework and whatever you do, don't panic.
BLM

Full post as published by Bernard Madoff on February 08, 2016 (boomark / email).