Originally posted by: jlmadyson
Originally posted by: Tango
It's not the stock markets. It's the Dow index. Nasdaq and S&P 500 are still lagging behind their year 2000 spikes.
Don't get me wrong, it's good to see the Dow performing good... but I wouldn't call matching 6 years old levels a great performance. Historically it's very unlikely that stock prices don't appreciate over a 10 year period, even if the Nasdaq is unlikely to follow this trend. The internet bubble will take a lot of time to recover from, and some prices will probably never be observed again before a merger and following delisting.
Also, histotically, the US had 6-years business cicles. We had a very unusual 10 year cicle during the '90s and now many people are betting this one will last longer than usual. But if you believe in the value of historical trends in stock index forecasting we should quite soon face a recession. It is not a political thing, it's just the way the markets work. Nothing goes up forever, and something really appreciated too much during the late 90s. I know quite a lot of people still holding oracle shares bought at 46$. They are very unlikely to see those price any time soon.
Make some good points there; however the NASDAQ and S&P have hit 5 year highs recently as well. They are lagging but they have had significant moves as well. R2K is at an all time high as well.
Well, the difference between a 5 years high and a 6 years high is pretty substantial considering we are talking about the difference between year 2000 and 2001. Nasdaq was over 5000 and now is in the lower 2342. Lots of road to cover.
Personally I am out of US equity. It just doesn't make sense to me. Too many other options are going up 10 times faster with manageble (to me) risk, expecially if you consider the currency exchange movements and the fact that the dollar is very likely to depriciate. But I 100% understand we all are different. The financial markets are now 80% of what I do, trade on a daily basis and can diversify a lot. Some people just don't want to keep an eye on the markets every day. But in the beginning it was surprising to see how little diversification there usually is in american portfolios.
My advice for 2005 and 2006 was India, Japan, Latin-america, Commodities and Europe. If you really want to play the game big, Pakistan is the new name. The returns in these markets were tremendous. Granted, it's not always like that. In the last 2 years the markets were uncommonly easy to track and forecast. I still don't advise China. I was right on this one last year, and I have been wrong this year until now. I still don't see the right return/risk ratio. I pick India over China every day. I mainly do qualitative analysis on ETF and FX, that also is why I am not scared of emerging markets.
On the US markets I consider very likely a correction in June. But I am out of it, so I am not paying that much attention. My last stock was google and at some point I thought it was enough for me. Greed always work against you. Small investors are always putting money were a substantial appreciation has already happened. It's basically greed and lack of information. If you wait for the big Wall Street Journal headlines before doing a trade, most of its value is gone already. At some point you have to cash in, or at least put some moving stop-loss points. Russia for example has been white-hot for years, but right now I wouldn't advise it, as the risks are not offset by possible returns. Still an Hold, but not a Buy. Too much volatility based on the price of Oil and Gas. Right now I see a lot of money raining in energy ETF. Fine, maybe Oil is going to 80... but so what? you are looking into a 10%... is it worth it? sure looks good if you bought in 2002, but right now... risk/returns not worth it. Unless you do options and play in the short-term. In this case you basically can do money on anything.
I would go short on the Russel 2000. Increasing interest rates matter a lot in that market.