Opinion: Everyone is a genius in a Fed-induced stock rally
I’ve noticed that many long-time bears are capitulating. If you look at market history, when bulls feel invincible and beaten-down bears give up, you have the makings of a market top.
Yet at the moment, the Fed appears to be in control, and they will do everything in their power to keep the market from sinking. In fact, the Fed has injected itself into the market in a major way. Chairman Janet Yellen has made it clear she will keep interest rates low for a “considerable time” and will use whatever tools are necessary to keep the market stable (i.e. levitated). Most investors believe the Fed will protect their investments from any and all harm, but that can’t go on forever. When the Fed attempts to extricate itself from the market one day, that’s when the music stops, and the blame game begins.
So if you are one of the few bears still standing, it’s not easy fighting the herd. I believe that trader Jesse Livermore was right when he said that to make big money you have to sit and wait. Although there are warning signals this bull market is coming to an end, you may have to wait a while longer. One major signal will be a huge snap in the S&P, that is, a drop of 100 to 150 points. Until then, trying to time the top is difficult in this environment.
To the bears who have given up hope: Don’t forget why you have refused to participate in a faux bull market that is pretty on the outside but deteriorating on the inside. If you look at previous market cycles, just when it seems too easy to make money, the bear appears and takes a huge bite.
DYI Comments: No doubt about it this one overvalued, over bullish, overblown market that is greater or similar in valuation to these market tops: 1907, 1929, 1937, 1973, 2000, 2007.
Valuation based on dividend yield only the year 2000 (August 1.11%) had a lessor percentage (currently 1.88%). Using our averaging formula to determine our asset allocation for stocks is now beyond our parameters of 100% greater than the average for price to dividends (1 / dividend yield).
9-23-2014
STOCKS
100 - [100 x ( Curr. PD - Avg. PD / 2 ) ]
________________________________
(Avg. PD x 2 - Avg. PD/2)
% Allocation -17%
-17% x 60 (max. allocation) = 10% short
AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION
Active Allocation Bands (excluding cash) 0% to 60%
85% - Cash -Short Term Bond Index - VBIRX
13% -Gold- Precious Metals & Mining - VGPMX
2% -Lt. Bonds- Long Term Bond Index - VBLTX
0% -Stocks- Total Stock Market Index Fund - VTSAX
0%-REIT's- REIT Index Fund - VGSLX
0%-REIT's- REIT Index Fund - VGSLX
[See Disclaimer]
**************
Maximum Aggressive Portfolio
(Super Max)
75% Cash - Hussman Strategic Total Return Fund - HSTRX
13% Gold - Tocqueville Gold Fund - TGDLX
2% Lt. Bonds - Zero Coupon 2025 Fund - BTTRX
10% Stocks - Federated Prudent Bear Fund - BEARX
0% REIT'S - REIT Index Fund - VGSLX
[See Disclaimer]
This blog site is not a registered financial advisor, broker or securities dealer and The Dividend Yield Investor is not responsible for what you do with your money.
This site strives for the highest standards of accuracy; however ERRORS AND OMISSIONS ARE ACCEPTED!
The Dividend Yield Investor is a blog site for entertainment and educational purposes ONLY.
The Dividend Yield Investor shall not be held liable for any loss and/or damages from the information herein.
Use this site at your own risk.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
No comments:
Post a Comment