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Tuesday, October 20, 2009

How greedy can you get

The market soared to new highs today, SPX hitting 1,100, and impressive 65% off of the market lows just in March!

Keep in mind, the market from its high in October 2007 down to the low in March 2009 was 58%. That decline took 13 months. The counter rally from March 2009 to today was 7 months.

If you are long, congrats great job. But pick a level, any level, say, SPX 999 or lower, and ensure you hit out the longs (at least partially) when this market starts to retreat. At this point, SPX could hit 1,200 before 1000, the market has been on an epic tear.

To put this in perspective, in 1972, SPX was valued at around 110, in 1985, the market hit spx 181, up 65% in 13 YEARS!! Another nifty stat for all the buy & hold for decades. If you bought in the market back in 1996 at SPX 666, it took (with roller coaster ride much higher and lower between) 13 years to get to the current valuation.

Both stats DO NOT include inflation, adjusted for inflation, the gains took much longer than 13 years to attain. No matter how you look at it, only very greedy people take nothing off the table after gaining 65% in 7 months. Keep in mind, bank interest rates is what..1%?

This is NOT A BULL MARKET. This is a market that was pumped with free money, fundamentals have not changed.

But then again, I have been very wrong since SPX 930. One positive for the market to keep rallying is the US dollar keeps collapsing. The more the dollar collapses, the more the market rallies, until the day a devalued dollar causes fear. Remember, if the US dollar ever does a true collapse (not a bleed lower) the US government in effect is insolvent and must close shop. This happened in Iceland, and many other governments. I am not suggesting that will happen to the US, just pointing out how high the stakes are if the USD becomes so low, that panic strikes.

The market is no longer for investing, its a casino. Be sure to leave the table with chips in your pocket.

From WebSurfinMurf's Financial Blog

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