David,
your theory is paranoid, but brilliant. If Cap Gain tax rate is indeed reduced then getting a lot of people to cash out on heavy blue chip gains will be a big revenue producer for the gov't. (Although I can't quite figure out why it matters anymore how much revenue the feds bring in since the debt seems almost fantastical.)
To respond to Ray, I too have basically the same strategy, pick good small to mid caps and watch them closely. I REALLY ENJOY finding gems and really research things thoroughly, at least I like to think. I too usually own shares in about 4 or 5 companies. I feel good about this strategy at the moment because two of my picks (CPCI at $12.25, OTEXF at avg. cost of $6.75) did very well last week as a lot of other stocks got killed. I note that the "M" for market conditions is the LAST factor weighed by O'Neill of CANSLIM fame.
I'd like to pick up on what Ray said: "A massive amount of global economic activity in the last few years, especially in the developing world, is creating incredible demand for products and services. You can find this growing demand even in remote towns in developing countries. I think all these doomsday predictions about a 1929 like stock market collapse are way overblown, because the developing world's appetite for products and services is just beginning to take off. Global commerce today cannot be compared to 1929, when global trade was mainly based on raw materials."
Incredible demand? Perhaps. That would indicate that you have to find out how those demanding are going to get the money to pay for what they want, and search out good companies who sell to developing economies. But mark my words, there is a depression-like ebbing of demand amongst the rich and middle classes (many of whom really no longer have the buying power or future opportunities which would support previous levels of consumption). The super-rich cannot generate the kind of WIDESPREAD demand for things like nice real estate, and various forms of conspicuous consumption, that keep levels of demand high. My view is that with a buoyant middle class and working class, all of whom EXPECT TO BE EMPLOYED AND BETTER OFF IN THE FUTURE, you have plenty of spending on all of the little consumer items, luxury items, and bigger ticket things like real estate that keeps a lot of other people employed as well. When all of the cabbies, bartenders, etc. etc. etc. are employed AS WELL, then there is plenty of spending. I look around and I see fewer people buying real estate, fewer people willing to spend a lot on drinks etc. while on vacation (tight fisted syndrome), etc. etc. etc. No one knows when they will lose their job, so they are cautious.
So, while globally there may be a lot of opportunities, I think a massive crash in real estate is quite possible, and also, a continued ebbing of demand in places like North America. At some point the downward spiral could put a severe chill on the stock markets.
BUT!!!! It may very well be that we are in a totally new kind of economic environment, in which great North American companies do fabulously well as they sell their products to the rest of the world which has nowhere to go but up. As long as the market stays in line with earnings rather than fantasies, it could continue to run for years.
Sorry to babble on like this.
SUMMARY: Demand crisis looms; real estate downward spiral likely; deflationary environment; lots of despair here at home; but lots of opportunity for companies which sell into the international market in this new era of global capitalism. Could very well be an 'investor's nirvana' as pundits have stated, but psychology could change if low inflation tips into deflation. That could cause panic. |
