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I agree, let the market do the talking. My trading philosophy is:
1) Do the underlying fundamental research (be it with an individual
company, or economy -- i.e. earnings growth/valuation) and determine a
logical premise, taking into account probability and risk/reward.
2) Use technical analysis to determine when to enter trades in the
direction that supports the fundamentals, and passing on trades that
contradict fundamentals & common sense (due to fact that the risk far
exceeds the potential gains). If that means missing out on the last spurt
to the heavens in a ridiculous markets like the Nasdaq, or manias-meltups
like Qualcomm, so be it. I certainly respect the momentum of the upmove
and would not try to call a top and sell it short. Using the most simple
of all technical analysis techniques can keep you out of a hell of a lot of
trouble -- that being the trendline. I won't begin to short the Nasdaq
bubble directly until major tendline support is broken, and the first
shocking plunge takes place. Studies have been done on past market bubbles
and the safest place to short sell a mania, they determined it was after
the initial plunge, and after the next half-hearted attempt to climb back
out fails. This usually occurs at accepted fib levels (38.2%, 50%, or
61.8% of a retracement of the initial drop).
3) Since there are so many ways to make money in a mania market like we
have, without chasing the indexes or individual issues to the heavens, why
take the risk. Logical alternatives are: short the bonds, short
commodities on rallies,
buy puts (18 - 24 month LEAPS) on a number of the most ridiculously priced
of the equity issues.
4) Understand intermarket analysis, and study current and past relationships,
in order to diversify the trades when the bubbles do finally burst. i.e.
gold will likely skyrocket, commodities will dip then later rally strong as
US dollar tanks, etc...
I did ride the market higher thru early 1998, when the Asian meltdown(still
in progress as China readies for its devaluation) worsened I read all I
could on the global economic news, and at that point refused to chase
stocks higher.
I do agree that folks are counting on baby-boomers to keep pumping this
bubble up for another 7-10 years. As rates creep up, the risk mounts,
until the first panic sell off begins. When confidence is lost, the
boomers will panic (alas human nature) and the meltdown will begin. The
(green -- never experienced a bear market) money managers will help them
liquidate (in an attempt to protect their returns & jobs).
James
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At 06:21 PM 1/2/00 -0800, Gary Funck wrote:
>On Jan 2, 3:09pm, Dennis Holverstott wrote:
>>
>> I'm sure nobody cares about my world view and there's nothing certain
>> about it but I give the bull market in US stocks another 8-10 years with
>> corrections and increasing volatility along the way. That's based on
>> demographics and the baby boomer population bulge. IMHO, that stuff
>> drives markets in the long term as much as central bank and government
>> policy. Simple supply and demand. A similar study called the top in
>> Japan pretty well and suggests they aren't out of the water yet.
>
>Your position that the market will run another decade/so is shared
>by Dent, and others as well, though they place The Top at 2007-8 or so
>based upon the theory that the 50-somethings possess they major
>buying power. I ran a study that shows that this conclusion is
>not necessarily supported by the data. Here's a note that I posted
>to the economic "long wave" list:
> http://csf.colorado.edu/longwaves/dec99/msg01055.html
>
>The home page for the site is:
> http://csf.colorado.edu/longwaves/
>
>The text is excerpted below:
>
>"The maximum correlation occurs in a younger cohort age
>group, ie, 25-36 than is typically discussed in demographic
>studies. Dent arrives at an older 40-50 cohort whose
>numbers peak out in 2007 or so.
>
>Using the cyclic correlation methodology, note the strong
>correlation to the 25-36 age group, and that the cohort's
>numbers begin to drop off in 2001. Using the 25-36 cohort
>as a baseline also pushes back the point at which the
>population first began to pick up, 1978/so."
>
>Two charts are included, and the orginal Excel spreadsheet
>used to perform the calculations.
>
>>
>> > when the aged are on the streets begging for food and shelter, the riots
>> > and crime waves rage, thousands of banks fold, and this nation is brought
>> > to the brink of civil war over the economic collapse that is an absolute
>> > certainty.
>>
>> Anyone who believes this should not be on a trading list.
>
>Probably so. And most traders are going to let the price do the
>talking, rather looking out ahed five to ten years.
>
>
>
>
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