Monday, March 14, 2011

WHY I'M IN THE BEAR CAMP ON STOCKS!

I’m not a Stock Market expert, by any means, but I have watched and traded it every day for the past three years.  I read the pitches from the Bulls (those who expect it to go up), and the Bears (those who expect it to go down) on a daily basis, and the bulls have been beating the bears hands down, but I believe the winds of change are upon us.  Especailly through the summer.

When the market crashed before, gas prices were soaring, people lost their homes because many had to choose between having the gas to drive to work or making their house payment. (We all know what happened to the market then) Judging by my last electric bill, the soaring price of food, and the price of gas, people have no choice but to cut back.  It is called survival.

Short term, I’m on the side of the bears, and here is why.

  1. April of last year was when the majority of the people had the most invested in the market, and many people wait a year before they sell, because the taxes are lower on long term capital gains that are held for at least a year.  It is time for them to take some profits off the table.
  2. The market tends to trend lower during the summer months, because all of the big fund managers go on vacation.
  3. Gas prices are almost as high as they were when they crashed the market before, and may go higher because of the unrest in the Middle East.
  4. The US Dollar is in a danger zone, even though it may go higher, the trend is lower.  That means your dollar will buy less and less, but the prices of everything you use will go higher, especially food and gas.
  5. Stocks tend to cycle, and stocks I have been buying or watching are going up some days, but they are tending to cycle a little bit lower each time. This tends to happen before the market corrects itself.
  6. The whole world seems to be in turmoil.  From Earthquakes, and Tsunami’s in Japan, mega tornados, and flooding from Mississippi to Missour, to war in the Middle East.
  7. 7.  You will have more banks fail this year than they did when this crisis started, and the housing market is in the pits.

However, the reason I’m bearish at the moment, may have just as much to do with superstition, as it does the hard facts listed above.

  1. I’ve never read tea leaves before, but the other day, I made a different kind of tea, and when I looked at the leaves that had settled in the bottom of my cup, they spelled out the word stop.
  2. I’m an avid reader of “Uncommon Wisdom”, with Larry Edelson, and right after I saw the word stop in my tea leaves, he sent me an e-mail that said, “Read the Tea Leaves”.
  3. A couple of days later, I’m looking out my window and there is a big X in the sky, so I’m asking myself, Was that another stop sign?
  4. Then I have a dream about the Dow Jones Industrial Average reaching the 12,000 level and having great difficulty. 
  5. Analyst put a price target of $6.00 on one of my favorite stocks recently.  It has been trading around $3.25 to $3.50 over the past year, and generally when an analyst raises the price on a stock like that, it skyrockets up, in a matter of days.  It has been weeks, and it has barely risen.  What that tells me is people in the market are afraid.
  6. Then I go to turn off my computer and the words (probably from an e-mail) flash across the bottom of the screen, “Stop Trading”.
  7. An astrologist predicted that the new “Super Moon”, full effects expected on March 19, will cause Earthquakes, wild weather, and a wild Stock market.  Right after his prediction, Japan was hit with its worst earthquake in 129 years.  
Whatever the reason you may be wondering about the direction of the market, be it superstition, or cold hard facts; if you are not getting out, buy yourself a little protection to the down side. ETF’s like SEF, and SH are a good place to start. 

It would not hurt to pull a portion of your stocks, that are not dividend stocks, out of the market while you have a good profit, and keep a little money on the side to buy back in at bargain prices, if it crashes. 

Your stock broker may not tell you this, but you can pull your money from stocks, and keep it on the side in their money market account, without drawing it out of your IRA and 401K, and incurring huge tax liabilities.  It does not hurt to ask your broker if this option is available to you.

Also, check out Uncommon Wisdom, with Larry Edelson, for some of the best advice you will find on how to protect your hard earned dollar.

That being said, I would love to see the little guy pull the rug out from under the big guy before they do it to us again.

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