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Irrational exuberance: suspension of disbelief as the Big Balloon takes off

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March 26, 2009 – Comments (4) | RELATED TICKERS: WMT , XOM

Is anybody ready for one of those crazy, crazy rallies that's not based on anything but hot air and momentum?

I'm calling one. Not the one that already happened, the one that might happen this coming week. Money is coming in off the sidelines now. All those near-retirees and middle class folks with some dollars put by for a rainy day are hearing the guff on MSNBC about the market having bottomed and buying back in with their life savings. Look out for fund favorites like WMT and XOM.

It might not last. But it might, for a while, if they borrow enough money from China to reinflate the Big Balloon.

OK, so I don't believe this is going to happen enough that I am putting real money where my mouth is. But I believe it enough to have covered all my short positions. And to take a gamble on it in CAPS world. It's a bad idea to catch a falling knife, it's an even worse one to hang on to a rising hot-air balloon.

4 Comments – Post Your Own

#1) On March 27, 2009 at 1:06 AM, motleyanimal (38.50) wrote:

On January 2, 2009, the S&P closed at 931. We aren't there yet. That's why I am not overly excited about this rally, which is only a retracement of an oversold market.

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#2) On March 27, 2009 at 2:51 AM, checklist34 (98.92) wrote:

Man I hope so!  That'd be fun.

And then I'd wind up standing there wondering WTF just happened and all of that...

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#3) On March 27, 2009 at 8:37 AM, russiangambit (28.83) wrote:

Individual investors are still hiding. 3 weeks rally is too short a time fram for them. If the market can hold above the lows for 3 months, then may be. People scared about loosing their jobs are not going to invest in stocks.

There are mainly insitutions in the market right now. just look at the volume.

 

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#4) On March 27, 2009 at 9:47 AM, arboretum (27.96) wrote:

russiangambit - you're probably right that it's mostly institutional. But money may be starting to flow into mutual funds again. I'm not thinking about people scared of losing jobs, but those who smartly went to cash in their 401ks last summer.

motleyanimal - again I agree it's a retracement and will likely be resolved by another slump. The issue is a lot of people are bearish right here or have been since 760 or so. I think there's a big risk to short positions here still.

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