this has got to be a first. someone actually issuing a sell signal to its investors and the market. http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/06/06/cnmorgan106.xml
I still think it goes higher over the next 3 months myself then get ready for the autmn incident. Look to sep for the big move i
Very bullish IMO. Central Bank in Europe acknowledges their economy is on fire = companies and consumers doing better and better in EU marketspace = more revenues for US companies selling to Europe = more $$$ for people who are net long stocks 200%
There is a body of opinion though that says that higher rates proportionally exert more downward pressure on companies and therefore the stock markt than the upward momentum gained from a strong economy. Though i could be wrong.
The interesting point is their signal composition : "The first of the three signals Morgan Stanley monitors is a "composite valuation indicator" that divides the price/earnings ratio on stocks by bond yields. It measures "median" share prices that capture the froth of the merger boom, rather than relying on a handful of big companies on the major indexes.[...]The other two gauges measure fundamentals such as growth and inflation, as well as risk appetite. "Investors are taking far too much comfort from global liquidity. Markets always return to fundamental value, so people could be in for a rude awakening. This is the greater fool theory," he said. Anybody any suggestion what is meant by "THE GREATER FOOL THEORY" ?
The ECB rate rise is a done deal but seasonal factors and higher long-term interest rates do point to at least a good summer correction or consolidation.
i think quite simply it means being long stocks in a market that is full of bulls and bullish comments and using the old classic from 1929. ' OF COURSE THIS TIMES ITS DIFFERENT' it will be different this time because when the deleveraging begins in these markets there will be an unprecedented meltdown. read about the reverse leveraging that went on in 1929. it was carnage and happened over days. but as many people point out these days ' ITS DIFFERENT THIS TIME'
THE GREATER FOOL THEORY A theory that states it is possible to make money by buying securities, whether overvalued or not, and later selling them at a profit because there will always be someone (a bigger or greater fool) who is willing to pay the higher price. When acting in accordance with the greater fool theory, an investor buys questionable securities without any regard to their quality, but with the hope of quickly selling them off to another investor (the greater fool), who might also be hoping to flip it quickly. Unfortunately, speculative bubbles always burst eventually, leading to a rapid depreciation in share price due to the selloff.
If everybody is so leveraged up long to the brim, then why are we only up 7% YTD I wonder? and like 10% annually over the last 5 years