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Tuesday, June 1, 2010

Storm Clouds on the Horizon

$500 Challenge Project Balances:

The Three "Sisters":

Investing "Sister" Balance: $770.61

Trading "Sister" Balance: $1,844.63

Interest Bearing "Sister" Balance: $425.30

Total Challenge Project Funds: $3,040.54

Yes, I've been gone for a few days. The wife's aged grandparents needed help around their home. Painting exterior windows. Replacing winter glass with window screens. Cleaning some rooms. The kitchen drain needed work. So we took advantage of the long weekend, and traveled back to her grandparents house to help out around their house. I was actually going to shoot over and visit with "Ohio1998" in Pittsburg, but we carpooled with other family members, and never even really had the time away from the grandparents that I could have spent elsewhere. Sorry Derek.

I figure that the “State of the Economy” video I had last week would sort of sum up my thoughts well enough, so that a “Week in Review” podcast was not really necessary. And since the thirty first of May is the fifth Monday of the month of May, then we have already exhausted the Challenge Projects' “rule number two” for the month (I will say that any dividend investors should be prepared for further drawdowns on their dividend accounts. I know I am).

But allow me some some space here to clarify some of my comments from my “State of the Economy” entry.

For some reason, through private messages (pm's), comments and emails, ones seem to feel that I have suddently turned bullish on the entire economy and the markets.

So let's back up just a bit.

I don't think in a linear manner. That is why I don't predict. People who use linear models predict. I don't. So when I see storm clouds are on the horizon, it means I go about preparing for this possibility. This doesn't mean the storm 'will blow into our neck of the woods', or that the storm will even materialize at all. But the storm clouds are on the horizon and a prudent person is prepared for that eventuality.

I was not saying that 'the recovery is on'. I believe my comments were that we could have one final deflationary flush and then we could begin to discuss being in the 8th or 9th inning of this entire mess.

A deflationary flush is not a pretty affair. Not in the slightest.

But if you're going to make money with investing and trading, you have to decide what scenarios will lead you to purchase an asset.

It's all well and good to talk about fear, and horrendous market conditions as well as 'concerns for the economy'. But if you never look beyond the fear, then it becomes impossible to look for situations that you can purchase assets so that you can .. I don't know … make money?

To my mind, it's just a question of how much volatility we'll see, and how much continued government interference.

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Note: This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 14 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research, and tolerance for risk.


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