Great post, Harry!!
I think much hinges on whether there has been a shift in the psychology of the average investor and that remains to be seen. My sense is that it has shifted and if the next rally is lack-lustre and/or there is a pronounced sell-off after the next rally, I think that it will confirm the end of this bull.
A former colleague of mine, from my corporate days, who chats with me often about the markets was on the phone with me on Friday--and his tone had changed. He has invested his, not inconsiderable, funds in the market-- a combination of mutual funds and individual stocks--quite a bit in the past two years. He knows that I exited the market, for the most part, almost a year ago--and looked askance on my decision to do so at the time. He shared with me that he was deeply in the hole at this point. Just about everything that he owned, many of them, quality companies, were well off their highs -- and he was looking for the next decent rally to bail out of some of his positions. Now he is the much heralded long term investor--not given to impulsive actions--but when he tells me that he is looking to bail, it does make me wonder how many others there are of the same ilk.
Let's face it, investor psychology is the key--on a fundamental basis we are over-valued. I read some where that Abby C had said last week that we are now 5%+ under-valued. And as M Burke pointed out, she sure was not screaming out when the indices were at their peaks that we were 5%+ over-valued -- so there is a built in bias on the part of the brokerages etc to keep this thing afloat. So we hear the spin-meisters doing their thing.
I suspect that we will rally next week--but given that this is the conventional wisdom, who knows! In any event, if we have an anemic rally look for the next down-leg to begin.
I know that you are in Canada--and that the currency there has been losing value in relation to the dollar. Are there cracks appearing in the economy? My sister, who lives in New Zealand, was telling me that NZ is now in a recession--given that they do a lot of trade with countries in the Pacific Rim that is not altogether surprising. Apparently the currency there has lost about 30% of its value in relation to the dollar.
My regards |
