I don't remember what day it was, but it was back in early March, when the whole world seemed scared to death.
I was reading some article predicting the imminent collapse of General Electric (NYSE: GE) -- which at that moment was trading under $7 -- when it suddenly dawned on me: These people are terrified!
And something else, Warren Buffett's famous maxim: Be fearful when others are greedy and greedy when others are fearful.
I said to myself, "If this isn't the bottom, it's close enough. If I buy here, I probably won't regret it in five years."
I did buy, and that turned out to be a good move. But I'm starting to get that feeling again -- only this time, in reverse.
Isn't it time to be fearful?
I don't understand why this rally keeps going. Actually, that's not quite right. What I don't understand is why anyone thinks there's any sound fundamental reason for the global stock market rally to keep going. I'm not cashing out yet (and I probably won't), but I think about it every day.
It's true that the acute moments of terror -- both in the markets and in the economy -- have passed, and if nothing else, the markets were sure to rebound somewhat from where they were in early March. But up 40%?
Think about what's really going on out there:
it's still going up.All sorts of manufacturing-sector indicators, like rail freight volumes and demand for "distillates" (a catch-all term for things like diesel fuel, heating oil, jet fuel, and the industrial chemicals produced when oil is refined -- basically, the stuff that isn't gasoline), are still declining.There's good reason to believe that the housing bust has a long way to go.Retail sales are still sluggish, and consumer lending is way down -- folks just aren't spending money.I could go on and on. But you get the gist -- the rate of decline may have slowed in some areas, but it's still declining. But shifting from an economic meltdown to a mere nasty recession doesn't constitute a recovery.
Sooner or later, the markets are bound to figure this out.
Long story short, I think it's likely that this rally will fizzle and we'll revisit the March lows -- maybe not next week or even next month, but before next year. Continued... |