One more piece of bearishness which may help fuel this continued creeping rally higher.
Markets climb a wall of worry. All I can say is that Richard Russell may be correct. I don’t have a crystal ball. I do know that I would look for a correction to the 1/2 way point of the 10 month 4,000 point rally in the Dow. I’ve been writing that for about 6 weeks now. However, on the bullish tone, we are continuing to have newsletter writers and such call for 1) a double dip, or 2) a major meltdown to last March’s lows. Richard Russell is recommending zero stocks in your allocation.
In his recent best seller, In his New York Times Bestseller ‘The Great Depression Ahead: How to prosper in the debt crisis of 2010-12,′ Harry Dent forecasts two scenarios for the Dow Jones in 2010: one, a fall to 3,300-4,600 in a broad crash also taking down real estate and commodities, including gold and oil; second, for the Dow to go even lower to 2,200-3,500.
With all due respect to anyone who is able to make a living, much less write a NYT bestseller, I wonder if either of these two gents has thought of getting short and making their next investment killing? Their first, most likely, was monetizing their opinions in to a book or a newsletter.
I firmly intend to compile my own book sometime in the future, but I will guarantee I will have acted on all of my opinions. And in the immortal words of Forrest Gump… “That’s all I have to say about that…”
I respect every analyst who makes a living selling a newsletter. I would wonder, however, if Mr. Russell has now bought those puts. If he’s right, he would get a 5 to 1 payoff, minimum on his investment. If he got short and rode just 2 mini Dow for 3500 points, he’d make 35000. Go a ahead and get short and look for the home run then. If he is right, a 20,000 account could yield a handsome profit. Want to make a million? Ten million? 100 million? Just sell enough futures, or buy enough puts. 🙂
When I first came on the floor, I remember I rode up in the elevator with Tom Baldwin. To me at age 25, and Baldwin was probably 40, I felt I was standing next to Babe Ruth. I hadn’t even begun to trade yet, but was a phone clerk or a arb clerk at the time in the 10 year futures pit.
Anyhow, I remember at that time, when he got off the elevator, the remaining people on the elevator were kind of quiet. Then someone spoke up and said, “yes you too can be like Baldwin… Just 1) Trade Huge and 2) be right…. Its a simple formula, but there were only a few guys who would go into an unemployment number short 500 bonds…That’s why Baldwin left the CBOT a multi millionaire, and is not spending his time writing newsletters or books. 🙂
Anyhow, I digress, back to Mr. Russel and Mr. Dent…
If they are wrong, and we all get short and then the Dow rallies 3000 points more, what’s or recourse? lol They will just write another book or another newsletter explaining how the “timing was wrong” lol. In the meantime, there are millions of readers out there paying for their considered opinions.. So really, as long as people continue to read them, there’s no down side for them.
Come to think of it, I think I’ll just go ahead and write that book asap. lol
My reasoning for being cautiously bullish is because there is so much bad news out there, with Greece and the EU, the rising dollar, etc. There is a ton of cash sitting on the sidelines still. We have yet to get through the first quarter of 2010.
If we get through March or April with not significant flush down to the 8600 level, which is the 1/2 way back point of the 10 month up move…. we could have a rally fueled by money which has been sitting on the sidelines for too long, and sooner or later those money managers are going to have to start buying again. That is their job, to buy stocks and trade stocks and make money in stocks.
The sheer force of these sidelined investors jumping back into the pool could create a mini bull tsunami. How long the tsunami lasts is any one’s guess.
When the tsunami comes though, there will be limited chances to escape the short squeeze.
All I know is that after 20 years, I know that when Barron’s and other news services are firmly embraced in the den with the bears, generally they are wrong.
Sooner or later, they will pull the trigger on the long side. That action could easily spike us up to the key 11,000 level. And it would be a perfect scenario, simply because no one is expecting it. Generally, markets punish popular opinion. That is one of their major functions, I believe.
So, if everyone is bearish, and waiting, my leanings continue to be on the bullish side.
New money pouring into the market will raise the tide, and the shorts in the market will fuel the rise if they get squeezed and have to puke their positions.
With all due respect to the gentlemen I cite in this entry, I think they are a fade. Time will tell, and if I am wrong, I will be the first to give them kudos and a verbal tongue bath… but right now, I want to go buy calls and fade them into the sunset.
That is all.
Good Trading