RE: "You scare me I2...at times I think you are serious."
I was being serious. Bonnie said, "oh, the ones that didn't get wiped out on margin calls are still buying. We'll have a few more rallies before they're wiped out." I believe that she is correct. Subject to change over time, my market projection is currently this:
1. We will have a very volatile November, including several failed rallies, but the market will not decline significantly beyond S&P of 875. During this time, bearishness will steadily increase as it has over the last several weeks. The moves will be abrupt and violent, causing those bulls highly margined to get (as Bonnie put it) wiped out and the weak hands to sell near the bottom.
2. After the short-term drop, everyone who is going to sell will have sold. Additionally, the bears will have increased their short interest. The ongoing retirement account funding and the strong hands will continue to slowly buy and, since there will be few sellers, the prices will move higher.
3. As the prices move higher, the short sellers will get more and more nervous, waiting for the big Kahuna that doesn't come. The shorts will cover, which will drive up the prices again. Those bulls that panicked, will find the market 10% above where they sold and decide that they better buy in or they will miss the next 30% move up. This in turn will send the market spiraling higher and higher. Before you know it, a buying frenzy, with the shorts trying desparately to cover and the average Joe throwing every penny he can get into the market.
4. The market hits a frenzied top. That is when Bonnie's and the other bears' scenario plays out. Over the next two years, the market drops 60%. The species of day traders nears extinction. People watch their retirement savings dwindle to only a small percentage of the glorry days. The vast majority of today's shareholders sell out, vowing never to invest in the stock market again.
5. It takes 15 years for the market to get back to its highs on an inflation-adjusted basis.
Best wishes,
I2
P.S. - Or maybe it won't happen that way. Boy, it's fun to have a beer and think about it! |
