I’ve sin Father…again! (watched CNBC-TV with the sound on again). The last 90 minutes of trading brought back memories of happier days at Wall & Broad St. Harry’s may actually have a patron or two tonight who won’t be drinking just to drown their sorrows. If the gitty picture looked familar, you’re right. We saw this same excitement just two weeks ago when the DJIA rocketed up from under 7,900 to 9,500. Unfortunately, it didn’t last long and I don’t expect this rise to either.
Yes, I’ve been looking for a tradeable rally. In bear markets, rallies are very sharp but don’t last long. i wanted to see the market test the October 10th lows and in time, I believe we shall see that. I have no doubt we can see follow through and believe it or not, the DJIA could rally all the way back to 10,400 and still be in a bear market pattern. I doubt this will occur but if it did, I would look to go short again.
It’s critically important to realize that we’re going to see some of the worst economic quarters in decades. Corporate earnings estimates are way too high. Bear markets dramatically shrink P.E. ratios. In addition, there are tens of millions of baby boomers who are now very much underwater in their retirement accounts. Trust me, they will be sellers going forward.
The vast majority of financial advisors and investors were weaned on only bull markets. To them, it always comes back. Before you buy into that know two things:
- There have been several periods where it took years to get even again including investing in the 1920s. If you did back then, you weren’t even until 1957. Baby boomers won’t have the luxury of years.
- The Japanese market hit 36,000 in the 1980’s. Ever since then, numerous advisors have predicted the bottom was in. It fell Monday to a 26year-low and Japan didn’t have one-tenth the probems we do.
Let the Rah-Rah crowd on CNBC-TV do their thing. Just remember, you don’t want to be someone’s dinner
