09/30/2012 No, This Time is not Different

Small Portfolio	XLF & IAU	18.17%
Position	Date	Return	Days
DECK	6/15/2012	-23.65%	107
RIMM	7/16/2012	3.45%	76
DVN	9/7/2012	3.93%	23
OKE	9/25/2012	1.05%	5
SEAC	9/25/2012	-3.92%	5
CAJ	9/25/2012	-6.95%	5
DDAIF	9/25/2012	-6.17%	5
SSD	9/25/2012	-4.79%	5
AF	9/25/2012	-5.45%	5
AM	9/25/2012	14.13%	5
S&P	Annualized	5.31%
Small Portfolio	Annualized	13.60%
Large Portfolio	Annualized	16.28%

 

No rotation scheduled until near the end of the week, and no mandatory rotations.

The market is struggling, caught between a global recession and global liquidity from multiple central banks.

The fiscal cliff is looming, and the big money is in disbelief.

I’ve been looking through the history of national banking crises today in the book: This Time is Different http://www.amazon.com/This-Time-Different-Centuries-Financial/dp/0691152640/ref=sr_1_1?s=books&ie=UTF8&qid=1348980803&sr=1-1&keywords=this+time+is+different

Here’s what the book says:

The sovereign debt is terrifying, which is usual for a nation that has just experienced a banking crisis.  The average amount of time until the nation starts increasing tax revenues (not rates, but revenues) after a banking crisis is five years, and the average explosion of sovereign debt is to increase it by 89%.

It’s been four years and our debt has exploded by (only) 60%.

Also, the average decline in housing value after a banking crisis is 40%.  Ours has only declined by 16%.

Just by averages, that would give us another year before the economy starts supporting the government instead of the other way around, with another 3 trillion in debt to go and another 24% of housing values to lose.

2013 is going to be an interesting year, no matter who is elected.

And people think they are going to time the market in this environment?  It’s all I can do to keep from stuffing everything into a mattress.

But that might be the worst of all, because these kinds of crises also end with an explosion of inflation.  Might as well throw the money away if you’re thinking of putting it into a mattress.

We live in interesting times.

Tim