Thursday, September 6, 2012

Tactical Technical Rally

And that folks is the real question. Are we in a new secular bull market, or just a tactical rally within a trading range stock market that we have envisioned?
During times of high volatility and great economic uncertainty, it pays to remember that stocks represent partial stakes in operating businesses. Therefore, as long as the businesses you own are producing satisfactory results, it is best to ignore the market’s temporary appraisal of your holdings. It is worth noting that during secular bull-markets, stocks outperform bonds and cash.
A secular bull market has to be backed by a productive driving force... a new technology or industry that employs people, expands real production, and increases standards of living. We have seen none of that since 2000. Both the housing bubble and the current stock rally have been liquidity-driven, not productivity-driven. Until the next big technology takes root, we are destined to see repeated cycle of large rallies followed by failure to lower lows, and the efforts of the Fed & ECB to counteract the nature forces of recession will do nothing but accentuate those swings.
Since (unlike some people and/or groups) I tend to buy low and sell high - this hurts me how???? Every completed cycle sees my portfolios larger. Even if the system crashes - dividends tend to stay ahead of inflation. - Dividends were one of the very few things that were able to stay relatively ahead. My Portfolios will also do well in this environment. Even a secular Bear has quite a few up cycles in it - it is not really a problem IF you are prepared. As I said before "Bear markets simply put good stocks on sale." I believe this is a quote from "The Contrarian Investment Strategies" and is fitting at this point.
last few years??? I do not know about how anyone else did .The dividend paying stocks that I bought on sale were largely responsible for this performance. By the end of the year - not only was I ahead, but my portfolios had hit a new high and are still hitting new highs this year with no (or very little - I would have to check to make sure) cash added from my pocket.
Out of my being curious - what kind of hedges do you use? My main "hedge" is my trading portfolio.

Thanking You
Atul Sikrai
Sr Vice President
WiTdom investment advisory