Jon,
Obviously we are not in agreement on the current topic, but there is one point on which we are close
Those with a sufficient capital base - one much larger than that required in the current market environment - will be able to survive in that market.
Most of us would agree that there is a high correlation between risk and reward. Those with a large capital base can live comfortably on low percentage returns on positions with limited risk, and I agree with you that these folks have a higher probability of surviving than those who risk much in an attempt to gain much. Some of the more savvy traders around here still have lower risk long term investments for that very reason.
Still enjoying this market, but I won't for one minute lose the understanding that what is happening right now is insane
But here I have to ask by what measure do you gage this "insanity"? Sure there are a relatively small group of stocks that have outperformed the market by a wide margin, but the market as a whole is not outpacing its historical growth. One of the great concerns that has been expressed by the media is the lack of breadth in this "bull market", and that, IMHO, may be it's very salvation. The market as a whole is not going crazy. Look at long term charts of the various indices and tell me where you see insanity. Nasdaq is going crazy because the index is capitalization weighted, and a few of today's hot issues are carrying it to lofty heights. I agree that it will not go this way indefinitely, but whether it will suddenly fall apart or just roll over is anybody's guess. But I don't see that event, whichever way it happens, leading to the public disillusionment you predict.
I think Tai Jin and LPS5 touched on it several posts back. If the market overall is going to fall into an extended decline, it will be the result of some global catastrophic event that affects the world economy, not because of an overextension of a few hot stocks everybody is chasing. Those issues may very well crash. I see individual stocks crash every day in this market, and as long as they continue to do so to offset the astronomical gains in other issues, I have no reason to believe the broad market is in trouble.
The thing that I see, and have argued in previous posts that is truly different from the old market is that now anybody who has a computer is free to join or abort the chase in a matter of seconds instead of days, and that, coupled with the response of the market establishment to this new market accessibility, is surely feeding the volatility characterizing this market.
Dan |
