No shattering news came out of Europe this weekend, but we did find out that nine of 10 banks agreed to the 50% write down of Greek debt. That should be good news for the market, but …
As always, I appreciate the questions/commentary from my readers, and I applaud their willingness to jump in with both feet. Nevertheless, sometimes a reader and I will not see eye to eye on an issue. The comment below is one such disagreement.
Apparently, there are only bulls out there Big money is pushing the markets, in general, ever higher. Meanwhile, all the EU piggies are lined up in the food line. I sure hope the kitchen doesn’t run out of food!!! I want to invest and am partially, but the bulk is in cash. I read it everywhere, we had the largest bounce gain in history, we are overextended, and we haven’t had a correction yet! Yet, we continue to climb that wall. Got a bad feeling doesn’t begin to describe it. I see some piece of news coming out, major or minor, and the snowball will hit the ground and if things weren’t bad enough before, you ain’t seen nothing yet!!!
Let’s start with the notion that only bulls exist in the market. I don’t have the facts, but my guess is that the percentage of shorts out there is as high as it has been in sometime. Although many were squeezed out this past week, plenty more are lying in wait because they have the same perspective as the reader above. And yes, we might still have the largest monthly gain in history, and unless things go the way the reader suggests, at a minimum, the market will enjoy the biggest monthly gain since 1987.
As to the correction thought … My friend, this past week was a correction; the market corrected the sad decline from irrationality in August and September. Frankly, I think the market is still undervalued, if you look at corporate earnings, P/E valuations, and the changing economic data.
As to the notion, “you ain’t seen nothing yet …” This apocalyptic viewpoint is stunning to me. How could things get much worse than they did in the fall of 2008 Think about this rationally for a moment. Back then, the world was tipping into a financial crisis of epic proportions. The LIBOR one-month rate rose above six, banks had no cash to lend to each other, liquidity was nonexistent, the housing market collapsed with a resounding boom, the VIX hit the mid-60s, and the policy makers in Washington were squabbling about throwing $700 billion at the banks to save them. Oh, and don’t forget that jobs were dropping at a rate of some 700,000 per month and the U.S. economy was contracting, not expanding. Unless something catastrophic happens on a massive scale, I just do not agree that we “ain’t seen nothing yet” because we have. I will never forget, ever, watching the market week after week rise and fall magnitudes beyond belief in a climate of fear that makes this irrational time seem rational. Yes, we have seen the worst of the worst, my friend …
Although lots of details still have to be elaborated on and some issues have to be clarified, yesterday’s deal underpins my view that the summit would likely be the place where the odds start to change in the right direction.
Now the above seems like a real heavy dose of rational thinking to me. How about you
Trade in the day – Invest in your life …
