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American Capital Agency Corp. Message Board

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  • eagledragon1 eagledragon1 Nov 3, 2012 3:03 PM Flag

    Fascinating ....the Uncertainty!

    So Doc, do you feel that all the issues directly associated with the fiscal cliff will be resolved before the end of the year? Or are you saying that if things are left unresolved it will have no effect on the markets?

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    • Hi Eagle,

      Exactly! I believe the answer to your first question is 'yes" only if Romney is elected. I believe the answer to your second question is "yes" also, meaning that it doesn't matter if it gets resolved or not.

      Again we may have a slight reaction in the market(the hangover), but life should sail on, and on, and on...because the majority of folks will still want yield in the face of 1% CD's or TIPS, and after they realize this non-event is exactly that(remember Y2K), they will continue on as if nothing has happened.

      Look at the DOW on Dec 31, 1999, before the lights were supposed to go out the next day...about 11,500.... We did OK down to Jan OPEX of 2000, after that other events pulled the market down, until 2006.

      My point here is that Y2K did nothing to the market in January.

      You'd think Sept, 01, 2001 would impact the market, no? Three weeks later we were down 17%, fairly significant...two months later we were right back pre 9/11. My main point is that there are many exogenous events that influence perception. The market is resilient, though, in weathering these storms and bouncing back to pre-perception status.

      Trying to gauge perception is the business of politicians and teenagers. Realizing that these momentary blips on the radar screen are opportunities for profit should be ours.

      Best,

      DocReits

      • 4 Replies to reits_r_us
      • In general, yes, we recover from recessions, savings & loans, black Fridays, etc. And regardless what the next couple of months brings, we will eventually experience some kind of recovery from that if things head significantly south. I am amazed at the confidence you have in Congress solving this issue if Romney is elected. And there are some consequences that will make some difference.

        The 2% SS income tax deduction we've seen for the last 2 years is likely to go away and not be renewed again. This will cause a 150 Billion dollar ripple in consumer spending. But that is small potatoes in the scheme of things. You see, I very highly doubt the fiscal cliff issue is fully resolved by Jan.1 no matter who is elected. I see some piece meal band-aiding happening, but not enough to achieve full resolution. I think we have times coming up within the next few weeks that will beg questions like those of last year, ala: Do you really want to hold over the weekend? Without anything else that's going on anywhere, I think this issue alone will be enough to cause a volatile disruption or two. I don't know about you, but I've seen quite a few small and mid caps already shed 10 - 20% off their recent highs. AGNC had dropped quite a bit since EX. I'm nibbling at some equities with decent fundamentals that have already dropped around that 20% mark and shorted several others a few weeks ago. But I by far feel better retaining mostly cash and looking to take advantage of very possible volatility within the next few weeks. I'm not all that confident the first of the year will start off very good if unresolved issues remain.

        I'm certainly not screaming the sky is falling. What I am forecasting is a likely possibility of good entry points, maybe some great ones, coming in the near future. It is indeed all about perception. My perception is of a heel digging, stalemated, gridlocked Congress that will continue to oppose themselves. I think the talk of another credit downgrade will surface its ugly head again. I know the result of another downgrade will be discussed. That result would not be so meaningless this time.

        As far as AGNC, it has rough waters to navigate. It is going to be a race against appreciating MBA versus declining portfolio size, spreads, and core income. I think there is quite a bit of retracement yet to endure. I see 29.50 to 30 as a real possibility. Nope, cash is king. Little to lose holding these days. All JMHO of course, but that is my take and play.

      • The U.S. and the world have considerable financial problems, and those problems will be resolved in some fashion, or at least serious attempts will be made towards their resolution in the near term.. Those attempts at resolution will impinge on the market, and some thought should be given as to how it will be affected. I can't see, with any certainty, what the results will be, and therefore chose a holding pattern until some clarity of direction is achieved.

        My short term trading stays pretty much the same, except for tightening a little. The short term trader's only real concern is that volatility continues, and he doesn't get hung by a new rope. . I

      • Doc -
        I always enjoy your insight and input. Darn - I thought for sure you would have the answer and now I find out it's a crap shoot. I've been doing my own investing for 35 years (more good than bad) but it always bothers me when I look at a chart of the Japanese stock market and it's 22 year slide (40,000 to 7.800) - are we next?
        Best -
        Garbonzo

      • Overall, the market weathered the Tech bubble and Y2K, but many stocks did not. The Tech bubble and Y2K created a swamp; those above the water line survived; but many tech stocks (and mutual funds that invested in Tech stocks) are still below water (examples: JDSU, CIEN, UIS, FMAGX, FCNTX, et. al.). Some of those below-water stocks may never recover to 1999 levels.

    • I sense what he is saying is that it is a crapshoot

      Sentiment: Strong Buy

 
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