Monday, April 29, 2013

The Party’s Over – It’s Time To Leave Now!

Turn out the lights, the party's over
They say that, 'All good things must end'
Let's call it a night, the party's over
And tomorrow starts the same old thing again

In January I wrote that the Model T was predicting a major market correction in May or June.  Since then, the blog has experienced a record number of readers and I have received questions about the model, the blog, and other issues. So as May approaches, it is time for a review:

2000 – While doing an analysis of several factors in the commercial transportation industry, I notice a connection between the industry, the economy, and the stock market.  My analysis indicates I should sell my stocks immediately. I do not sell and soon afterwards the market tanks.

2001- 2006 – I isolate the factors in the commercial transportation industry that are key leading indicators to the direction of the stock market and construct the Model T.

2007 – I start sharing the forecasts of the Model T with a group of around 20 investment professionals and industry colleagues.   The Model T correctly forecasts the market peak in October, months in advance.

2009 (June) – I am downsized from my job after 16 years and cast into the worst job market since WWII. June 2009 was actually the very bottom of the job market.  It was a very frightening environment and can only truly be understood by those unfortunate enough to have experienced it.

2009 (September) – I decide I need to write a business blog as part of my networking and personal branding strategy to help find employment.  I decide to base the blog on The Model T because it is unique and would showcase my analysis, forecasting and writing skills to potential employers.

Therefore I am sharing this information with the world not because it has no value and not because I am so altruistic that I just want to help people. No, I made this decision because I saw it as my escape from unemployment.  Ironically, my three plus years of writing the blog have only produced one interview opportunity (albeit with a Wall Street investment firm).

2010 (April) – I start working in a new job, in a new field and a different function.  I assumed I would cease writing the blog, until my readers convinced me they wanted it to continue.

2013 (January) – The Model T indicates that the stock market will peak in May or June and I publish the forecast.
2013 (February – April) – The stock market continues to rise surpassing the 1550 (S & P) model prediction in March and the plus 2% (1581) upper range in April.  This movement is very consistent with the Model T forecast.

Today - Currently, the Model T is flashing bright red.  It says to sell now.  The acid test of the Model T has arrived.  I do realize that I am either going to look like a genius or a fool.  When I went public with the Model T I didn’t envision this post.  Maybe I thought only my 20 initial comrades would still be reading the blog at this point, but around 3,200 people (and counting) around the world have read the prediction.

Two weeks ago the stock market had a few days of losses and several analysts announced the correction had begun. I didn’t sell then because I trusted the Model T to get to May.  This was a “test” correction.  It is what my friend professional investor Jeff Kaufman would call a “head fake”.  Because that wasn’t really the start of the correction, it may cause you to keep your money in the market longer once the real correction starts.

It takes “stones” to pull your money out of the market when it is this hot, but my friend Kurt (one the original 20 and a close follower of the Model T) pulled a big chunk of his funds out of the market last Friday.  I will sell off around 45% of my holdings (this is my practical limit based on tax and other factors) on April 30.  I don’t recommend pulling all your money out of the market because the model could be wrong. As I mentioned last time, some analysts predict the market will continue to zoom to record heights.  If your money is in mutual funds, it is easier to move more money out if you desire.

And this is not “sell in May and go away”.  In is a coincidence that The Model T is advising to sell in May, but I sense that this makes a May correction more likely.  Regardless, the Model T says the market won’t begin to recover soon (see below).

People ask me how I am going to reinvest.  In the short-term, a good option is short-term bond funds.  However some analysts fear a stock market correction could trigger another shock to the financial system, so you may want to just sit on the cash until the smoke clears.

The Model T is predicting a correction down (eventually) to around 1350 (about 15%).  It says the market should stay depressed about a year before starting a modest recovery.  But it looks like we will have plenty of time to prepare for that.

Let the games begin!

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  1. Brave! Kudos. I like your style.Hope you get a break where someone (Hedgies) is willing to pay you top $$.

  2. I'm keeping my money in cash and real assets. No more fake paper sold by thieves.

  3. Ups and downs are the parts of a business. So, don’t loss heart just committed to your aims and work with full boost.