What a wild ride!
To think the S&P 500 was at 666 back in March and here we are, less than 6 months later with the S&P finishing last week at 1,026 (up 54%), just a point off Friday’s high and up at levels we haven’t seen since the first week of October, when we lost 800 points in just 5 days (see 10/3 weekly wrap-up). At that time, Icautioned members notto be led into temptation to buy the S&P at 1,000 warning:
Keep in mind that governments are doing everything they possibly can to prop up the markets. As I said a couple of weeks ago, this is very much like the government throwing sandbags behind the totally inadequate levees in New Orleans ahead of hurricane Katrina – it may look like they are doing something but if the storm hits us, all these efforts will quickly wash away like sandcastles in the tide.
My protective picks at the time were real portfolio savers: SKF Jan $100s were $19 and caught the move up to $200 in early January (up 420%), DXD Apr $55s at $14.20 caught the spike just a week later to $110 (up 674%) and SDS March $77s at $9..95also caught the move on Oct 9th up to $130 (up 1,200%). At the time, I set danger levels on the Dow at 10,650, 1,135 on the S&P, 7,400 on the NYSE (I was ignoring the Nas and the Russell as indicators as they were too volatile at the time – now we are used to the volatility so we watch them too).
We were not surprised by the downturn in October – we were prepared for it as we had been skeptical of the stimulated rally from the start. The reason I went down memory lane was to remind myself this weekend what it is that we fear now – in this “new bull market.” It is very difficult to keep buying covers when those covers keep failing and it’s extremely tempting to take a bite of the apple and try to run with the bulls, even if you feel you are a little late to the party.
This weekend we initiated a new $100,000 Portfolio with the goal of creating a $2,500 monthly income as a way to supplement a more conservative base of investments. I pointed out to members that if $600,000 is returning 6% ($3,000 per month) then taking…
