Trevor, I understand your feelings. Lets start with the fact that the market makes huge moves in response to interest rate changes. Our rates are hanging steady, and the Fed hasn't moved interest. When Germany and Japan are trying to increase the value of the dollar, to push down our exports, the Fed probably feels some constraint, and in honesty we are seeing no real inflation (which also makes a market make huge moves). Wages are a little tight. I think that so long as those things are true, there will be no HUGE move. Of course, nobody blows a trumpet to announce that one of those changes is in the making, infecting our security.
Smaller changes come from overpricing of shares. I said the other day I thought things were too bubbly. I took some cash out, watched a fairly small decline and then the market started back up. My cash went back in. What I took out was in shares that had reached my expectations or, alternatively, created doubt that my expectations would be reached. And what I bought when I went back was shares that I felt was undervalued.
I found some cheap biotechs - companies close to coming to market with apparently good things, one company with a lot of cash and very low stock price - with stock at the low for the year, not the high. Even bought some Food Lion (a grocery store), simply because I am a retired Judge and felt strongly they were going to win an unusual lawsuit. Don't know that they will get a ton of damages, but their reputation will be enhanced by the judgement.
I think the only reassurance you will get is in hunting for good values. It is impossible to time the market. You can make money by buying "momentum" stocks - but let the market fall and you will lose your shirt. And when the market falls, value stocks will also go down but nowhere near as much as other stocks, even though the bargain you found will become a bigger bargain. There is nothing wrong with the market going up in response to increasing corporate profits, but there is a limit to those. When you see a stock with a ridiculous P/E, stay away from it. A lot of them have higher P/Es than I want. And like the lady said, if you are just too nervous then put on your pants and go home! |
