Hi, Gil et. all. I've been reading all the postings. I think you all have some good points. I have been operating with 50% debt up till September. Now I have sold out enough stocks to pay back my debt and then some. I want to be ready to buy if and when the market crashes. I don't have the guts to wake up and find my portfolio cut in two and my debt at the same level.
This gearing has made me able to make a lot of money in this bull market, but I think that maybe enough is enough. I am not sure about if there will be a crash or not. But I'm surely convinced that we will get a major correction or a longer bearmarket.
I'm basing this on the following reasons:
1) The bull market has lasted for 6 years. Never has a bull market lasted longer. (This really a lame argument, but still ....)
2) More importantly, this bull market has put high valuations on companies that probably is totally rediculus. Is a stock with a P/E of 60 on 98 earnings a BUY? I don't think so. Another example is that the SP500 has a P/S of 4,5 - four point five !!! That's crazy !!!
I guess my point is that in the form of P/Es, P/Ss and every other valuation method, the stock market is VERY FRAGILE for disappointments.
3) The only thing that saves the market at this time is the low interest rates. IF, there is some reason like Jeltsin death, we could get a spike in interest rates. Then there will be no mercy.
4) I think the attitude to 3rd Q earnings, is that we don't care about how good these earnings are, we only care about 4Q and 1Q. And I think that this will be a disappointment. All the latest statistics have been lousy (good for the bond market).
5) I think these two months blow-out, is the last in a long time. I think we're going in to a period with bad earnings for the companies, and this WILL bring the stock market down.
6) These last stages of this bull market, has been driven by lots of cash going into the market, and this pushes the valuation up. I'm scared if people start to look down. I think it's probably like in a cartoon where somebody runs over the edge of a cliff, and he runs several meters before he's starts to look down. And we all know how it ends.
Also let me tell you another story. A man bought 1000 USD worth of share X at 10. It went up to 20 and the man bought more. The stock went up again to 30, and the man not being a greedy one thought: "I've made good profit. I'll sell it". He called his broker and said "Sell it". But the broker replied "TO WHO??". When this frenzy is over, who's going to buy? When everyone has bought, who is there left to buy into a fall???
7) There is 570.000 people in the US who's occupation is brokerage of bonds and stocks etc. That's 30% more people than in 87. This is the number that REALLY scares the hekk out of me.
But still I'm holding a position in the market, because you never know when the game is over. But still I'm cautios, and do NOT buy into strength. I want to have muscles when the market comes down. IF it's not a REAL bargain I'm not a buyer. So Gil, hang in there. Stay cash don't change your position just because the market goes to new highs. You know all-time highs, is not GOOD - it's BAD. It means that things are more overvalued then ever.
This was a rather a long speech, but I've been reflecting a lot over it, AND I'm getting nervous. I think will be hitting 4500 before we're seeing a bull market again
Comments?
Talk to you all later
Andy |
