A diary of the thought process behind my investment decisions
Tsachy,Do you think S&P will up or down by next September? I think it will be down. What is your opinion that I respect since I am long term investor (and opportunistic trader). You seem bull for rest of the year.
That is a really tough question. I believe there are companies that are undervalued but I dont know about the market as a whole. I'm stumped on that question. Let me think about it.
Im not necessarily bullish until the end of the year. Im bullish until everybody else stops being so bearish.
Exactly. This rally may indeed just be the first big one in a new bear, or we may reach new highs before the bear starts. I can see either outcome, and I don't think we'll launch into a new bull leg. But I do know that the likely outcome is that we'll see at least moderate bullishness before we go down to new lows. Trying to make predictions about where the market is going to be on X date is something I'll leave to the pundits who feel compelled to make such predictions; and are mostly wrong when they do.
I strongly suspect we'll see the market approach or even break SP500=1000 sometime between now and Sep 2012. And I also suspect the market will rise to at least 1300 sometime between now and then. I plan to sell what I bought recently if that happens and then buy back again when prices go back down. The big risk I see is not so much Europe as the US. Suppose we tip into deflation here and the Republicans go rogue and stand firm against further bailouts because of tea-party pressure. Every congressman is up for election in 2012, remember. We've already seen Rick Perry threaten Bernanke with physical violence if he "prints" any more money. So things could easily spiral out of control. And as they did, the Republicans might spin it that Obama was to blame for the crashing stock market and end up painting themselves into a corner so as to make it even more difficult to resolve the issue before the election. If the Republicans then win the election, they'll be faced with an unholy mess. Argentina style massive budget deficits, inflation, and CPI underreporting would be the easy way out. The tea party would be outraged, but then that's the 2014 election. Maybe the congressman could all vote themselves a huge retirement package before then.In Europe, the worst case outcome is every country for itself, but within each country, unlimited bailouts for the non-banking sectors. That is, after cutting the PIIGS free, I suspect the Germans, French, etc will do what it takes to keep their industrial sector going, though they might nationalize their banks in the process (wiping out the stockholders and making the bondholders take a big haircut). And ditto for the PIIGS. That's the worst case. More than likely, things won't even go this far.
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