I believe things will end badly for the market as well; who knows WHEN the music will stop. I started scaling out of some longs when we first hit 1100, thinking we would get a pullback. We've just been hanging around ever since. Something has been nagging at me to take more profits and wait for something to happen, but until the news AND the market are turning negative, I will sit on my hands. Maybe I'll lose 10-15% on the downside as this thing rolls over, but in the meantime, maybe we'll pick up another 20-30% or more to the upside. Who knows?
Although I don't think the USA will experience hyperinflation as severe as that seen in Zimbabwe, it's a good (and recent) guide to what can happen when financial conditions are too loose. You're right that "the market will find a way out and a way down eventually", but maybe (as was the case in Zimbabwe) this is in real terms, however in nominal terms the stockmarket continues to move higher.
What he said. Also, have none of you heard the old Wall Street saying that a bull market does not give easy entry? You could satisfy yourself as well through some very very simple statistical tests of what happens in past bull markets and how market behavior differs in periods everyone knows were bear markets. Intermediate term, over the next six months, you might get your entry anyway: we're in a major resistance zone here IMO, so I'm expecting flat for a while, and China will be tightening. Somewhere along the way you'll get a dip, no doubt.
...and then there's this: NYSE Market Internals Summary: Volume is extremely heavy for this time of day. Breadth is bullish across the board. Advancing Issues: 1731 / Declining Issues: 1262 -- for a ratio of 1.4 to 1. Advancing Volume: 775,347,000 / Declining Volume: 408,636,000 -- for a ratio of 1.9 to 1. New 52-Week Highs: 637 / New 52-Week Lows: 33. NASDAQ Market Internals Summary: Volume is very heavy for this time of day. Breadth is bullish across the board. Advancing Issues: 1471 / Declining Issues: 1182 -- for a ratio of 1.2 to 1. Advancing Volume: 1,052,738,000 / Declining Volume: 912,060,000 -- for a ratio of 1.2 to 1. New 52-Week Highs: 243 / New 52-Week Lows: 26. Highlighted the new 52 week highs on the NYSE. More new 52 week highs made today than there are stocks in the S&P 500.
You miss all of the context of this 'bull" market. To try and compare this Fed liquidity driven bull market to something from the past is somewhat reckless.
Pete Stolcers has a blog that addresses the core reasons why the market is going up and why the pullbacks are so shallow: http://www.1option.com/index.php/gl...ng_a_new_2_year_high_stocks_will_grind_higher "Under allocated Asset Managers are the only ones running scared. They have waited patiently for a pullback and they havenât gotten one. Now they will have to chase stocks or risk missing a year-end rally."
Disclaimer -- the following long-winded response is entirely made up and no proof is offered that any of what is said is actually true. One of the biggest mistakes that new traders make, and some not so new but unsuccessful traders also make, is to try and rationalize market movement as a direct function of the economy. The market does, in the long run, seem to respond to economic reality, while in the short run it seems to respond more to the anticipated economy going forward. It is not unusual, however, for the economy's influence on the market to be masked. Example: we are currently experiencing a very protracted recession in some sectors -- for example housing. Furthermore the employment picture is bleak and threatens to remain bleak for at least the next several years. And it may be that in discounted dollars the overall economy will drag on at low growth for many years. It is true that some sectors have the appearance of doing fairly well. For example the medical sector has for as far back as I can remember done so well, except for brief periods during political campaigns, that if one ridiculously extrapolates far enough into the future removing a wart will consume the remainder of the U.S. GDP. But there are other sectors that in discounted dollars are not doing as well as it may first appear. Several factors impact this. One is that companies that have laid off workers have cut expenses and this can, with the help of creative accounting, result in short-lived productivity gains and an improved bottom line. Another factor is that earnings in nominal dollars increase so long as prices keep pace with inflation and a company that does business abroad earns in currencies stronger than the dollar but reports in a weaker currency, such as the dollar. This can make it appear that earnings are improving when in fact they may not be improving in discounted dollars at all. However the market reflects earnings in nominal dollars, not discounted ones. Still another factor is that the Treasury and Federal reserve are, so far as possible, combining forces to mask the economy's underlying weakness. When the Government leverages up by borrowing, the borrowed money is spent, and that spending masks underlying economic weakness, just as if you personally masked your own economic weakness by taking out a loan and going on a spending spree. You would appear to others to be doing rather well financially until you had to pay the borrowed money back. The government however has no limit to the nominal amount of money it can borrow because it can, if need be, borrow from the Federal reserve an unlimited amount of dollars. However, not even the government can borrow an unlimited amount of purchasing power, because the purchasing power of the dollars borrowed will decrease if some of the money borrowed is newly created and has no counterpart in increased real productivity. Currently the real economy is so weak that the Federal reserve has some concern that the inflation rate may fall below zero, which is a horrible thing for a debtor nation because it means that debts will have to be paid back with dollars that have more purchasing power than the dollars borrowed had. This is the equivalent of paying higher interest on borrowed money. The amount of money the U.S. can borrow without its creditors demanding much higher interest rates is greatly aided by the fact that the value of U.S. public and private assets amount to many trillions of dollars -- think National Parks and mineral and agricultural assets -- and by the dollar being the World's reserve currency. The world is awash in dollars. Central banks around the world do not want to see their dollar denominated holdings devalued, so they will intervene, often unsuccessfully, in currency markets to support the dollar. This gives the Federal reserve even more leeway in expanding the money supply. But of course there is a practical limit. Eventually Central banks will try and convert some of their bond holdings to cash and sovereign entities or private parties will try to use those dollars to purchase hard U.S. assets, and thus at least partly hedge against further dollar devaluation. The U.S. congress, however, may intervene and try and prevent the sale of assets to foreign entities, just as they did when Chinese interests tried to buy a U.S. Oil Company, or Arabs attempted to buy a U.S. shipping port, or when the Minseng bank tried to rescue UCBH in California but was prevented by the FDIC from doing so. Currently the dollar is being weakened by Fed policy and the announcement that they plan to buy 600 billion in treasury debt in coming months. As long as the dollar remains weak and further weakness is anticipated, the market will be buoyed up as it is now. The market is not going up because the economy is strong, it is going up because the dollar is weak and expected to get still weaker -- despite protestations from our trading partners. Think of it this way. Suppose today you bought a share of company XYZ at 10$ per share and tomorrow the dollar is devalued so that its purchasing power is only half what it was. What is your one share of XYZ worth, in dollars, after the devaluation? Finally consider that stocks are worth what someone will pay for them and that this can be very, very far away from their intrinsic value which may be effectively zero for most non-dividend paying stocks. People even bought GM after it was clear that GM had a negative net worth! The market often does not reflect reality, it reflects instead the anticipation of higher or lower prices created by Wall Street. That is what CNBC and so-called analyst's upgrades and downgrades are all about. When you consider both dollar devaluation relative to other currencies and the very indirect and tenuous relationship between intrinsic and market value for stocks why should anyone be surprised that the market is going up, or for that matter be surprised when it goes down. Trade the market as it exists, not as you think it should exist.
NASDAQ UP 13 OUT OF 14 DAYS HMMMM Nov 5, 2010 2,577.63 2,582.18 2,568.78 2,578.98 2,092,850,000 2,578.98 Nov 4, 2010 2,569.27 2,579.62 2,564.05 2,577.34 2,492,050,000 2,577.34 Nov 3, 2010 2,532.83 2,541.42 2,511.31 2,540.27 1,990,410,000 2,540.27 Nov 2, 2010 2,525.94 2,534.88 2,518.29 2,533.52 1,914,980,000 2,533.52 Nov 1, 2010 2,520.45 2,532.37 2,491.46 2,504.84 1,904,790,000 2,504.84 Oct 29, 2010 2,505.99 2,517.50 2,505.86 2,507.41 2,068,700,000 2,507.41 Oct 28, 2010 2,516.16 2,516.20 2,489.76 2,507.37 1,998,340,000 2,507.37 Oct 27, 2010 2,484.09 2,505.35 2,478.01 2,503.26 2,013,240,000 2,503.26 Oct 26, 2010 2,476.51 2,503.03 2,470.12 2,497.29 1,914,350,000 2,497.29 Oct 25, 2010 2,491.62 2,507.03 2,490.11 2,490.85 1,746,320,000 2,490.85 Oct 22, 2010 2,461.60 2,479.39 2,459.43 2,479.39 1,648,180,000 2,479.39 Oct 21, 2010 2,470.72 2,482.14 2,436.34 2,459.67 2,135,480,000 2,459.67 Oct 20, 2010 2,443.20 2,469.72 2,441.07 2,457.39 2,016,770,000 2,457.39 Oct 19, 2010 2,442.21 2,462.94 2,422.14 2,436.95 2,241,840,000 2,436.95
He was talking about the economy. He was thoroughly refuted already. You're talking about the stock market, not the economy. With the unprecedented "Bernanke Put," stocks are in a totally different realm than anything in the past. There's no point comparing this to some past era--especially one where valuations were actually decent. Really, this is 101 stuff. But stupidity seems to know no bounds around here.