Re: Financial topics
Posted: Wed Jun 17, 2009 11:57 am
43% rally, start of something wonderful or maximum ruin in action?
I continue to feel like we are currently in a generational event (many signs point to this), so although there's a heck of a lot different now than during the last generational crash, I still think the '29-'32 event is useful for comparison. Dividend yields > 6% and single digit normalized P/E ratios on the S&P will point to a generational bottom (and buying opportunity of a lifetime). We were far from that at the March lows, and even further from it now.
Anyway, the first rally after the '29 crash took the DOW from 212 to DOW 297, a rally of 40%:
In 2009, the S&P500 just rallied 43% from low to high, so 3 percentage points more than the first (and biggest) rally during the 1929-1932 generational market crash. And of course, this is what happened after that initial 40% rally off the '29 low:
An epic plunge where that initial bear market rally 1930 peak was not seriously challenged again for the duration of the bear market which bottomed about 85% below that initial rally top.
I know some traders that are looking forward to a pullback so they can get aggressively long. Others are already aggressively long. I probably don't know any more than anyone else, but my suggestion is to protect your wealth instead of being aggressively ANYTHING.
The rally we just had was epic in its own right, bigger than the post '29 crash rally (not to mention we did it in just 3 months). You don't hear all that many people talking about this because it may not seem like a remarkable rally or cause to celebrate considering the heavy losses that preceded it and the fact that we are still far from all time highs.
I know some smart analysts that think the market will top out at MUCH higher levels, later this year. They may be right, I have no idea. Others even think we are in a new bull market, and the worst is all behind. I hope they are right for the sake of the country, but I'm not buyin' it...
Personally I think it's time to be defensive. I am 25% short (the S&P500 and real estate), the rest is in tax free muni bonds, money markets, FDIC insured CDs and a long position in natural gas (UNG) which is still close to its own epic plunge bottom and likely to double some time over the next 8 months or certainly within 2 years at the latest – making it an excellent long term investment and long term inflation hedge). I also own HSGFX in my retirement accounts, and think this fund will outperform the market with less volatility over long time periods. And finally, I am very interested in several arbitrage opportunities which currently exist and can be found here:
http://www.arbitrageview.com/riskarb.htm
Low risk, double digit (annualized) returns are quite possible using pure hedged positions on these arb deals.
I continue to feel like we are currently in a generational event (many signs point to this), so although there's a heck of a lot different now than during the last generational crash, I still think the '29-'32 event is useful for comparison. Dividend yields > 6% and single digit normalized P/E ratios on the S&P will point to a generational bottom (and buying opportunity of a lifetime). We were far from that at the March lows, and even further from it now.
Anyway, the first rally after the '29 crash took the DOW from 212 to DOW 297, a rally of 40%:
In 2009, the S&P500 just rallied 43% from low to high, so 3 percentage points more than the first (and biggest) rally during the 1929-1932 generational market crash. And of course, this is what happened after that initial 40% rally off the '29 low:
An epic plunge where that initial bear market rally 1930 peak was not seriously challenged again for the duration of the bear market which bottomed about 85% below that initial rally top.
I know some traders that are looking forward to a pullback so they can get aggressively long. Others are already aggressively long. I probably don't know any more than anyone else, but my suggestion is to protect your wealth instead of being aggressively ANYTHING.
The rally we just had was epic in its own right, bigger than the post '29 crash rally (not to mention we did it in just 3 months). You don't hear all that many people talking about this because it may not seem like a remarkable rally or cause to celebrate considering the heavy losses that preceded it and the fact that we are still far from all time highs.
I know some smart analysts that think the market will top out at MUCH higher levels, later this year. They may be right, I have no idea. Others even think we are in a new bull market, and the worst is all behind. I hope they are right for the sake of the country, but I'm not buyin' it...
Personally I think it's time to be defensive. I am 25% short (the S&P500 and real estate), the rest is in tax free muni bonds, money markets, FDIC insured CDs and a long position in natural gas (UNG) which is still close to its own epic plunge bottom and likely to double some time over the next 8 months or certainly within 2 years at the latest – making it an excellent long term investment and long term inflation hedge). I also own HSGFX in my retirement accounts, and think this fund will outperform the market with less volatility over long time periods. And finally, I am very interested in several arbitrage opportunities which currently exist and can be found here:
http://www.arbitrageview.com/riskarb.htm
Low risk, double digit (annualized) returns are quite possible using pure hedged positions on these arb deals.
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