Is this rally for real?

[NW-Bound]

I think you're right under normal, relatively calm market conditions. But not too many months ago when the VIX was hitting all time highs, I was seeing a huge spike in volume on these leveraged ultralong and short ETFs (mostly the short).

There are probably some cancellations there between these ultralong and ultrashorts. I do not own any, and have looked at them briefly out of curiosity. In early 2000, during the tech bubble burst, there was so much volatility that made your head spin; yet there weren't any of these ultra ETFs then. I remembered it as yesterday because yours truly was deep in it. I had 80% of portfolio in semiconductor and telecoms, though not a single dotcom. Got hurt bad and lost 50%, but I survived and recovered.

Recently, have read some postings here where people have lost 50% in this downdraft, yet do not claim to be as heavily weighted in financials as I was in tech in 2000. Whoa! This is truly a biggest recession since the Great One. My lesson in 2000 saves me this time. I've got scars to prove it.

 

[REWahoo]

Is this rally for real? Here is a guy who thinks so:

Why the Countertrend Rally Can't Be Stopped

The market is recovering from an unusual and vicious financial crisis; this is a time in which market participants, after having been petrified, are starting to come to grips with the fact that Great Depression II is probably not going to happen.

This is also an extraordinary time - one in which vast numbers of market participants are wrongly over-allocated to cash. As investors adjust their asset allocations to account for new realities, the rally in financial markets will be extremely powerful.

Indeed, because of the large cash allocations, there’s the danger that at some point, things could get out of hand on the upside. Because of the effects of massive inflows by institutions that invest mechanically and are essentially insensitive to fundamentals, the market could overshoot to the upside, failing to properly account for the risk (as opposed to the certainty) that things could get materially worse in 2010.

However, we’ll worry about the risk of bullish overshoot later. ... he financial crisis is over, for now. And for now, I believe this market is going higher - much higher.

 

[Dawg52]

Is this rally for real? Here is a guy who thinks so:

However, we’ll worry about the risk of bullish overshoot later. ... he financial crisis is over, for now. And for now, I believe this market is going higher - much higher.

Why the Countertrend Rally Can't Be Stopped

Sounds good to me. I have no problem with regaining some of my losses. The tricky part will be knowing when to get out before the next slaughter.

 

[REWahoo]

The tricky part will be knowing when to get out before the next slaughter.

I see yet another convert to the DMT school of investing...

 

[Dawg52]

I see yet another convert to the DMT school of investing...

Not really, just found a hole in the sand with my name on it. Waiting on me to check in.

 

[NW-Bound]

DMT?

Note how oil and other commodities have been moving up as investors anticipate that the world-wide recovery is imminent. If and when the bears capitulate, the move up can be explosive.

It takes guts to short the market now. If I were a bear, I would stay on the sideline. But then, I have always been a bull. Well, a bull crossed with a chicken. Buy, buy, buy

 

[ziggy29]

Is this rally for real? Here is a guy who thinks so:

Why the Countertrend Rally Can't Be Stopped

"Can't be stopped" is hyperbole, I think, but in the short run anything can happen. The author here is correct that there is a huge amount of cash that got spooked out of the market and that we shot down so fast that some amount of snapback was inevitable. I'm not sure I share his belief that the news will start getting a lot better in the next few months and I sure as heck don't see the S&P getting as high as 1350 any time soon.

 

[REWahoo]

...

DMT?

Standard Acronyms You May Find on the Forum

DMT - Dirty Market Timer

 

[NW-Bound]

Ah, you are talking about me!

But I always consider myself a CMT.


PS. Portfolio 22% below Oct 07 personal high watermark. Still only 57% in equities. Buy, buy, buy.

 

[REWahoo]

... and I sure as heck don't see the S&P getting as high as 1350 any time soon.

There's the rub. None of us* can see what's going to happen to the market anytime soon. Since I don't know when to get in or out of the market I choose to go with an asset allocation I think I can live with and hang on for the ride.

I view it as the least worst investment strategy available to me.


* Excluding those who claim to be able to predict the market accurately, every time, all the time - and drive by after the fact to say "I told you so".

 

[NW-Bound]

I sure as heck don't see the S&P getting as high as 1350 any time soon.

Me neither. However, the market is more likely to go up than down from here. For a CMT like myself, it is good enough reason to buy. No?

 

[Dawg52]

Ah, you are talking about me!

But I always consider myself a CMT.


PS. Portfolio 22% below Oct 07 personal high watermark. Still only 57% in equities. Buy, buy, buy.

I'm now down 'only' 16.5%. A couple of high octane stocks have come back pretty well. So I'm cautiously optimistic with emphasis on 'cautious'. Tough dealing with the target pasted on back.

 

[ziggy29]

I'm now down 'only' 16.5%. A couple of high octane stocks have come back pretty well. So I'm cautiously optimistic with emphasis on 'cautious'. Tough dealing with the target pasted on back.

Nice to see that dent on your forehead is starting to heal.

 

[REWahoo]

However, the market is more likely to go up than down from here. For a CMT like myself, it is good enough reason to buy. No?

Maybe yes, maybe, as these posters point out, no:

In this scenario stocks lose, bonds lose, commodities lose and cash wins simply because everything else loses its value relative to cash.

There are so many economic factors causing the market down swings that it is ridiculous. I believe the worst is yet to come....just my opinion. No, I'm not a pessimist, just a realist.

 

[NW-Bound]

I'm now down 'only' 16.5%.

That's it? Gee, it's only a finger cut, and you made it sound like dismemberment.

Perhaps it's time to start another thread to see who has been down how much.

 

[Dawg52]

Nice to see that dent on your forehead is starting to heal.

Med's baby.

 

[NW-Bound]

Maybe yes, maybe, as these posters point out, no:

I saw their posts, but I have my own SWAG.

 

[NW-Bound]

A couple of high octane stocks have come back pretty well. So I'm cautiously optimistic with emphasis on 'cautious'.

Watch those high-octane stocks. They make your life exciting, yes?

Having some of the high-octane stocks (materials stocks like metal mining, fertilizer, energy, drybulk shipper and solar energy, etc...) was what allowed me to triple my portfolio from 2003 to 2007, despite being only 70-80% invested. These stocks are very sensitive to the world economy. No, I was not solely invested in them, only a good concentration, else would be a multi-millionaire.

There was no way I could have known to get out at the top, but if I didn't get out in early 2008, would have gotten hurt bad. No finger cut! You are talking dismemberment or disembowelment here, trust me.

You can tell that I like to live dangerously. After surviving a couple of hi-tech startup failures and the tech stock melt-down in 2000, this current downdraft didn't scare me that much.

As Soros (not a hero of mine, but an interesting man) said, your investment decisions reflect your understanding of the real world. My understanding of the world is a bit fuzzy, but sometimes I can see some shadows or shapes through my cataracts.

Sorry for the metaphors, but that has always been my nature.

 

[REWahoo]

Always interesting to follow up on market prognostications...

5/9:

I think the bear market rally is over. I think next week will be the beginning of a downturn.

5/10:

The rally is over. The downturn will start this week.

5/16:

...Downturn will continue for the next 4 weeks.

5/16:

Yeah, my crystal ball is great....downturn to continue for about a month.

Four and half weeks later, S&P 500:

 

[NW-Bound]

OH NO! Please, not another "Wheee" post!

 

[REWahoo]

OH NO! Please, not another "Wheee" post!

No, nothing of the sort. Merely a follow up on market predictions. I'm looking at yours at the moment.

 

[NW-Bound]

No, nothing of the sort. Merely a follow up on market predictions. I'm looking at yours at the moment.

Well?

My disclaimer is that I could follow the news around the world -- not just in the US -- to see if the fundamentals were improving, but I could not predict the next "Wheee" outburst.

PS. Portfolio is 21% below high water mark in Oct 07. Could have been a couple of percents better if I did not have to dip into it to pay for college tuitions and for food.

 

[REWahoo]

Well?

Never mind.

 

[W2R]

(Wheee!!!?!)

It's a beautiful day in the neighborhood... Just another 500 points or so for the Dow and I will be feeling really great about things.

 

[NW-Bound]

What!??

That's it! I will sell everything at market open tomorrow, then go short.