Steve, here's some thoughts on small caps and other topics:
Lately the rally has broadened out somewhat and the Russell broke over 400 as the Nasdaq and S&P made new highs.
I don't think the Rut will drop below 400, but I expect the market to continue this fairly narrow upward move. You can't have a more speculative market than this one, and unless you join the frenzy, it will be very hard to make money. Being in cash is not a bad idea. Another is to go with the popular large tech stocks - nifty fifty style. I hate to say it, but internet stocks are probably going to keep up their energizer ways. In short, buy momentum breakouts in any large well-known ridiculously over-valued "CNBC" stock and get out at the first sign of trouble.
Unfortunately, rational approaches like being short or buying value are likely to fail in this irrational situation. I don't think it's wise to buy any broad-based mutual funds, and I think it's a bad idea to short a rising bubble, and this thread is proof that timing the end is a futile exercise. The correct approach is to make money long on the rise, and then after a crash, go long in gold. Shorting is riskier and pays less, but it does pay a lot all at once, and therefore you can get sucked into its speculative appeal. Betting on the end is speculation, and if you're going to speculate, you might as well go with the flow and buy breakouts on the long side.
Frankly, I think this madness is going to continue until the outlook is so bad that it can't be ignored with a straight face.
This market is like an obnoxious fraternity student that doesn't want to stop drinking. This summer, he barfed all over the place only to get up again and drink some more, and he may continue to party for quite awhile still. He seems to be holding it well now, so he'll probably pound a few more for good measure. Just stay clear of him when you see him staggering, because he could fall on you and not get up again.
Cheers,
OO7 |
