Email : info@otcjournal.com
URL : http://www.otcjournal.com
To
OTC Journal Members:
|
Don't Forget to Become a
Preferred Member
Don't forget to subscribe to the
free preferred member list, simply click
here. You will receive an email confirmation.
Then simply hit REPLY and SEND. You will be included in the Preferred
Members list. You only need to do this once.
Or, to subscribe by email, send
a blank email to otcjournal-preferred-subscribe@lyris.otcjournal.com.
If there is any problem, you can
always go to http://www.otcjournal.com/pref-sub.html
and submit your email address.
For those of you who are wondering;
it's free and we have no plans at this time to charge preferred membership.
|
 |
Are You Scared
of the Market Right Now? |
|
Imagine you went out to dinner and
got food poisoning from a bad piece of fish yesterday. You spent the whole
night sick as a dog puking your guts out. Not much fun. I'll bet you wouldn't
be in any hurry to get back to the offending restaurant. In fact, the fish
you ate would probably be blackballed from your list of preferred foods
for quite some time.
For the next several years, when
someone suggested eating fish, memories of that horrid event would come
flooding back. The taste would come rushing back along with a nauseous
feeling in the pit of your stomach.
Sorry for the graphic metaphor, but
it fits the experience of many investors today. Watching your portfolio
and your 401K get decimated for three years was akin to the horrid, wretched
feeling associated with food poisoning.
Naturally, you are afraid to order
the fish, even though you loved it for many years. Getting back into the
market is like ordering that first piece of fish. You're scared. Memories
of illness come flooding back. Nevertheless, once you get that first bite
out of the way, fish becomes one of your favorite foods again.
If you haven't put the stock market
back on your menu, do so. Forget the wretched feeling associated with the
illness that pervaded your portfolio for three years. It's time to get
back into the market, and it's far from too late.
Here are some of the mixed messages
the "Gurus" have been funneling out through the mainstream media recently
that make all of us scared (myself included):
-
"The market needs a little time
to digest the gains and pull back and come to terms with this year's gains."
-
"There's no fear, and fear levels
provide the fuel for higher levels in the future."
-
"Stocks are over-hyped and overpriced.
Indexers are blind to valuation."
-
"This is not just a bear market
rally -- it's the greatest sucker rally of all time."
-
"The FED has pumped too much liquidity
into the system and falsely engineered this recovery" (isn't that
their job?).
Indeed, I have been carrying part of
the message you read above. I have suggested in the past that you take
out some market insurance by owning a few QQQ puts as a hedge against a
long overdue correction.
On Friday, after reading the employment
figures, I sold the 40 QQQ puts I recently picked up for a total loss of
about $1600. I purchased QQQ puts in August, September and October, and
lost money each time. I don't care, because I'm making it back many times
over on the stocks I own.
The market can be pretty stupid and
emotionally reactive over the short term, but looking out six months the
market generally gets it right. Six months ago the market starting demonstrating
its belief the expansion cycle was coming back. The market had it right.
The Bears had it wrong.
 |
It's
The Economy, Stupid |
 |
The naysayers simply have it wrong.
The confusing voices you hear from the media claiming "overhyped" and "another
bubble" are the sour grapes voices of those who were left standing on the
platform as the train speeded away.
The economy moves in cycles: from
expansion, to contraction, and back to expansion. The last month's slew
of economic data does not suggest iwe're back into expansion mode, it
screams expansion. Here are the facts:
-
September quarterly GDP came
in at a staggering 7.2%, completely blowing away the estimates.
This is the highest GDP growth rate since 1984.
-
On October 1st, the consensus analysts'
estimates for S&P operating earnings growth was 15%. The Q3
number actually came in at 22% growth rate.
-
The productivity rate for Q3
came in at a mind bending 8.1% growth rate- astounding- people are
working harder because there is more demand for products and services-
could job creation be far behind?
-
On Friday, October's Employment numbers
were announced. 126K new nonfarm jobs were created, vs. 65K estimate. Perhaps
as important is the fact that August was revised up from -41K to +35K and
September was revised up from +56K to +125K. The unemployment rate fell
to 6.0%. So much for the "jobless" recovery.
-
Analyst estimates for S&P operating
earnings over the next 12 months stands at $60.23- a 17% growth
earnings growth rate. This comes after two consecutive years of contraction.
The NASDAQ is destined to complete the
"V" bottom you see in the chart, which should take us back to 2100.
Despite what you hear in the media,
don't be afraid of the market. We are at the front end of a long term economic
expansion phase, and corporate earnings should continue to improve. Certainly
there will be bumps along the road, but the trend should continue.
The recent market performance supports
my argument that PE ratios and valuations mean little or nothing. Stocks
go up when investors perceive corporate performance is getting better;
stocks go down when corporate performance is getting worse.
It's time to exorcise the nauseous
feeling you had from the Bear Market food poisoning, and get invested.
That kind of food poisoning will only happen once or twice in your entire
lifetime. Don't allow yesterday's food poisoning to ruin today's meal.
Charts Provided Courtesy
Of TradePortal.com |
