mary, I am not sure whether I can answer your question. If your scenario happens, the boomers will not be able to retire at 65. To make things worse, if the expected REIT bubble bursts, we probably will look for a very secular bear market that will last a decade or longer.
Now a little comparison to 74 bear market:
The pundits have apparently decided that we reached a downside extreme on Friday, and that now is the time to buy stocks. If this is a downside extreme, it is a most peculiar one. The classic downside extreme of the past 30 years was the one that marked the 1974 bottom. Then, as now, there was a lot of bad news around about the economy and the world in general, and the air was full of gloom and doom. Nevertheless the degree of pessimism that existed at the 1974 bottom was far greater than it is today. To see what a real downside extreme looks like, let’s compare.
At the 1974 bottom the S&P 500 sold at 7 times earnings; 65% of the advisors in the Investor’s Intelligence Survey were bearish; equity mutual fund cash was 11.7% of assets; and only 4% of stocks were above their 200-day average. Now, that’s what a real downside extreme looks like. By way of contrast the S&P 500 now sells at 43 times earnings; 35% of advisors are bearish; equity mutual fund cash is 5.3% of assets; and 60% of stocks are above their 200-day average.
On a more anecdotal level, now most investors have held on to their stocks and want to know when to buy more. The leading financial magazines feature the stocks to buy in the recovery. In 1974 investors fled the market in droves and swore they would never buy stocks again, while the periodicals ran articles saying that the market would not come back for a long time.
I did long hold the view that the US stock market bubble will be another Nikkei. But that's another story.
Now finally about the qqq play. I believe that today we will fill the 9/11 gap at 1427 and 1440 for NAZ, which might turn out to be a decent play for a short term rally. I will probably buy QQQ july 26 calls at around 1. If a sharp selloff is seen and the 9/11 low is held, I will buy more at the close. If this is another slow bleeding process, forget about it and hold cash on the sideline.
Finally, the EURO is testing 0.98 this morning. The gold is on the move to make another run at 330. I think that the resistance should be taken out soon and the gold will make a run toward the next resistance at 350. JPM and its peers will be in deep trouble.
good luck,
larry! |
