For all intents and purposes, I believe we've been in a bear market since July. Yes we popped up to barely new highs after the crash in July, but in all truthfulness, IMO, we are in a bear market. The question is how long does it last? At least for now, my own personal feeling is that we don't really have any vision of the end of it in sight at least at this point. So, is the first phase of the bear market over and are we going into phase II. Technology has been doing well so far in this current market and for the most part has been trending up: Is it time to start shorting technology? I myself have begun adding positions to the short ETF: REW So, if we are going into phase II, does this also mean that the Financials and Real Estate are good places to start playing "contrarian" plays. From my own research, one thing I've noticed is that the financials tend to rally for about 6 months before the next bull market starts. Having said that, I think it's still early to be buying financials, but I don't want to miss the boat and the upside is large enough where I can justify starting to add long-haul financials. For my long-term plays, I've begun adding both URE and UYG. I actually think UYG will probably fall from the current price of 40 potentially down into the high 20's before the bull rally starts. But like I said, these are long-term plays, so I'm not afraid to buy at these levels:
bear markets dont start when the sp500 price/earnings ratio is in the mid teens....I may be wrong about that but im pretty sure its never happenned before....Maybe, "this time its different"?
Optimists argue that, on the basis of forecast profits, shares look cheap by historical standards. But the pessimists say this is because profits are cyclically high; use a smoothed average of profits and valuations are as high as they were before the crash of 1929. -the Economist
Short tech in January? I'd certainly be looking for reversal patterns on any substantive rally, but not yet.
Has the advance in stock prices been driven by growth or inflation? It's not a healthy sign when massive amounts of liquidity are required to keep the markets afloat. If the economy is being driven by inflation then the only thing that will keep things going is more inflation, which is what's happening now. How far can we go before the wheels come off the cart?
The problem is the government and financial sector did not let the bear market play out 7 years ago. They recreated a society living on what they took out in home equity and made home values go up with low rates. Lower rates devalued the US dollar. You donât need to be a genus to see inflation just buy eggs, milk, or gas. The S&P companies never fixed there problems. The government cut business tax which made them more profitable. They cut rates which made them more profitable. They cut personal income tax which helped the market because rich people have more money to invest and the average guy had more money for the inflated price of milk, eggs, and gas.
They haven't let ANYTHING "play out" since '82. Thats when they changed their managment to "Pump the money like a SOB, then LIE about the inflation it causes" That's still the deal today.
I wouldnt go short until the trend appears to be broken. Its not officially broken yet, but I feel it might soon. There will be plenty of money to be made on the short side once we go that much lower.
"Has the advance in stock prices been driven by growth or inflation? It's not a healthy sign when massive amounts of liquidity are required to keep the markets afloat. If the economy is being driven by inflation then the only thing that will keep things going is more inflation, which is what's happening now. How far can we go before the wheels come off the cart?" You might be right and so are the many other complex plausible arguments saying we are headed for a bear market BUT the record speaks louder than all the explanations and fancy theories. Beleive me in the past i ascribed to all these arguments but ive seen them proven wrong every time.I think these theories all make sense in theory but every time i have seen these thoeries come out when the sp500 is in the teens, the bear forecast are never borne out....The arguments are all right but the forecast never comes to be...I have seen these dire predictions many times since 1990 when the sp PE is in in the teens I personally just dont want to fight against the sp500 record anymore.After years of following wall st,I realize now that less is more as far as wall st. info/theories is concerned-too much static....BTW,i am not a super optimist ,i just care about what the market is doing in todays trading session. I also think housing in LA where i live will drop 50-60% from todays levels.