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Rising Tide: Rally To Continue

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May 05, 2009 – Comments (5) | RELATED TICKERS: BKCC , PEY , VEU

It seems that we are witnessing a "Rising Tide" of sorts in the market at this point.  I am new to CAPs and have been investing for approximately 5 years.  That said, I withdrew all my entire stock market exposure as the downturn first began more than a year ago.  I "invested" this money in E-TRADE's complete savings account and was making 3.3% (which is now paying under 1.5%). 

Despite the safety of a savings account (or low-rate CD), I cannot make 1.5% (far less than the rate of inflation) - chiefly because you are actually losing money and therefore your money is not working for you.  So, I am testing the market again (and suspect many other mid-level investors are as well).  I recently reinvested about 50% of what I previously had in the market.  So far, this has worked out.  I decided to go for safer stocks and those with good dividends (e.g. PEY, VEU, BKCC, and MCD). 

In sum, it seems more investors are facing a similiar situation as me: stay safe and make less than inflation OR engage in solid picks and try to catch the rising tide.  I am opting for what I believe to be a rising tide. 

Thoughts?

  

5 Comments – Post Your Own

#1) On May 05, 2009 at 3:16 AM, automaticaev (< 20) wrote:

i think it will go up and down in a primary uptrend.  Could get bad on one of the downs dunno. 

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#2) On May 05, 2009 at 3:17 AM, automaticaev (< 20) wrote:

come out of the cave eh?

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#3) On May 05, 2009 at 5:00 AM, bridgeboy0 (29.07) wrote:

Eventually, the market will recover and back up to where it was and beyond.  When will that happen?  I don't know.  In fact if you were smart enough to get 100% out of the market when it first started to drop then you're smarter than almost everyone on CAPS (definitely smarter than me) so I'm not sure why you need our help.

In a VERY small sample size, it looks like UltraLong is pretty good at timing up-turns.  You might want to ask him how long he sees this run going (but again, not nearly enough data to tell if he's lucky or good-- or both).

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#4) On May 05, 2009 at 8:45 AM, russiangambit (28.98) wrote:

In sum, it seems more investors are facing a similiar situation as me: stay safe and make less than inflation OR engage in solid picks and try to catch the rising tide.  I am opting for what I believe to be a rising tide. 

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Whoever is buying they are not like you. The most stocks that rose are cheap and junk stocks and financials. Either it is major short covering or college kids trying to make a quick buck. Defnesive and quality names barely moved.

Commodities started moving too but that is due to falling dollar. Who would've thought that all this money printing weill be bad for dollar?

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#5) On May 05, 2009 at 9:00 AM, amassafortune (29.09) wrote:

Wideopen, the economy will not be back on autopilot until new unemployment claims get down to about 400,000. They are expected to come in at 585,000 this Friday and 6.3+ million will be on continuing benefits. Many millions more workers have no jobless benefits. One auto job affects five other jobs and 140,000 autoworkers are expected to be part of the shutdown in early summer. Consumer spending drives 60% of the U.S. economy and there has only been a slight uptick in spending and consumer confidence. 

The 35% market rebound in the past eight weeks was huge historically. There will be a pullback and it could be soon. That said, if you wait until there is job growth again, you have waited too long. Pullbacks could be severe, but might only last a few weeks.

There is a reasonable chance the S&P will go from today's 900 to 1,200 within two years. That's a nice return. As long as you can psychologically handle a couple 10-15% retrenchments along the way, your plan is reasonable.   

Your timing for moving to cash last year was about as good as it could have been. Just beware, with home equity, consumer credit, worker raises and bonuses all weakened, sideline cash is one of the few remaining places the smart money is going to try to tap into for their gains this year.

Consider using trailing stops on your stocks. This way, you will participate in any continued market upswing, but if your stocks go down by x%, the stops will kick in and your position will be converted to cash before it wipes out your gains.   Good luck.

 

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