The good news for investors may be that "smart money" tends to sell early while the market is still rising, while there are still bullish investors willing to take the other side of their sell orders.
The bad news is that smart money is regarded as being smart because of its history of buying low and selling high.
Something to think about anyway.
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Since making a new all-time high on March 27, the S& 500 has risen 7%. That may make some investors and pundits nervous, but there is little to fear with regard to new highs per se: Stock prices do not mean-revert -- i.e., rather than fluctuating around an average, stock prices tend to drift upwards over time. As the Federal Reserve tightens policy and emerging-market demand cools, we are going to see plenty of unsustainable growth models fail to meet Wall Street expectations and slowly come apart at the seams. Click on the chart below to read the article
In my mind, the Bernanke years at the Fed can be divided up into two parts. After the Alan Greenspan Fed (of which Mr. Bernanke was a part), in an effort to combat the possibility of deflation, kept interest rates so low for so long that it created asset bubbles, the Bernanke Fed, now afraid of inflation created the environment for a financial collapse. This was the first part. As America and other developed nations struggle to recover from the financial crisis, the ongoing challenge now starts to claim casualties in multiple asset classes around the world. Buying into the market now at these valuations could result in a very painful affair, he said. What value investors should be doing is putting together a shopping list for when stocks go on sale. As if it wasn’t bad enough for the millions of Americans scraping by on paltry interest payments, now they face another threat: the loss of principal on their bonds and other fixed-income assets. The sell-off in fixed income began slowly on May 10, an otherwise uneventful day with no obvious catalyst for any change in sentiment. It picked up steam when Fed sources didn’t step forward to calm markets. Then, in comments to Congress on May 22, Mr. Bernanke said, “We could in the next few meetings take a step down in our pace of purchases.” Fitch Ratings warned last Tuesday that prices for single-family homes in the regions with the biggest housing rebounds had been outpacing the growth rate in the local economies and “could stall or possibly reverse” if big investors start selling. The Hindenburg—the stock market version, of course—may not have crashed into Wall Street Friday, but it certainly appeared to be circling. "When we do get that eventual decline, and it will come, it will most likely be a pullback rather than a correction or a new bear market," says Sam Stovall, chief equity strategist at S&P Capital IQ, in the attached video. |
It's always a good idea to keep some good articles, at least I think they are good for reference, so I can go back and read them later.
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