Today's Market
by Dr Invest
The talking heads are tell us how wonderful the market is and how that now is the time to empty your savings account of all the cash you have been protecting from market losses, investing while stocks are so cheap. After all, according to them, stocks will never be cheaper and to invest now is to guarantee that in only a few months you will be sitting on barrels of cash.
How long will it take for you to understand that you are being fed misinformation by people who want to take your money. When you hear, "everybody is buying" you are compelled to invest your own money. When you hear, "the economy has turned around, get in now or lose out" you feel that you will lose an opportunity to get into the market early.
Here is the secret, the volume of buyers in the stock market is not very high. This means that institutional traders are largely out. It is the day traders and beginners who are in the market right now. The market is going to turn down and when it does, there are going to be a lot of portfolio's hurt.
I want this market to reverse and move into a bull market. I want to set up my portfolio and see 2012 return 10%, 12%, even 14%. I am just like you, I want to put my money to work. But there are a number facts that point to a declining market. This is why I didn't immediately buy stock at the first part of January. So please, don't take my advice, but do your own research.
Here is the list:
- http://webreprints.djreprints.com/2812531083596.pdf
- http://advisorperspectives.com/dshort/commentaries/Conference-Board-ECRI-Leading-Indicator-Smackdown.php
- http://advisorperspectives.com/dshort/updates/ECRI-Weekly-Leading-Index.php
- http://hussmanfunds.com/wmc/wmc120109.htm
- http://www.pring.com/assets/pdfs/Interplay.pdf
- http://www.mcoscillator.com/learning_center/weekly_chart/dji_oscillator_rising_index_signals_trouble/
I do like simple trades and long positions because your investment doesn't lie, you get a simple clear picture of your advances. More sophisticated methods of OPTIONS and SHORT SELLING can be used, but this blog is for the beginner. Sadly, even the professional trader can often get lost in the complications of his trading, losing track of his real gains and losses. Many times it is not until the end of the year that the trader discovers the real outcome of his complicated trading methods. My experience is that the more complicated your trades become, the greater likelihood you will lose money. Using ETFs is a simple way to diversify and play down trends, buy why? Often there is a greedy motive, but why be greedy if you can see an increase in your portfolio by 30% after holding cash for a year and reinvesting when the marke is in an uptrend? Too often, the greedy trader will attempt various methods of trading at a time when the market is most unpredictable. Listen, even the professionals have not been able to squeeze a profit from 2011. Losing 20% on most portfolios, the professionals were not able to time their trades or change their trading style to win gains in 2011.
It may take another two or three months for the recession to show it's face. I suggested in past blogs that March is the likely month, but it could be earlier or later. And then it may not happen at all because the market has the last word on what the market does. The market is irrational.
For me, I will be happy to wait until the time is right and I feel that a gain is possible. Understanding that most of the gains occur from November to January, I can wait for the incredibly hot stock market to return me gains at that time.
(note: The above article is for entertainment purposes only and not to be used as investment advice.)
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