As long as you have stops to protect from a big drop and you got in early, you should be ok.
By Daniel at 1 September, 2009, 9:12 pm
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The problem we have is that while this could be a short correction, there have been no changes in policies that got us into the crisis we are in which this time was caused, like the Great Depression, by too much personal, corporate, city and state debt.
This is not an inventory recession like all since then. Thus, it can come in waves as more lost tax revenues leads to more cuts in city and state spending and layoffs which causes businesses that sell to government, to lay off people. We still have Alt A and ARMS facing us and the Commercial Loan problems that could trigger another wave of trouble.
Even the FED has reportedly said “no net new jobs for five years,” and that in and of itself is a huge cut in consumer spending in an economy that depended on 70% of GDP from consumers.
But, the FED is determined (and the Congress) to use programs like “Cash for Clunkers” to create inflation and consumption. The market could stay in a range, crash or even go to 20,000 depending on what the dollar does and what the foreign nations we depend on for loans do.
The U.S. no longer can grow the private sector as fast as it grows debt. That day is gone. We have to eventually, either default on the debt or hyper-inflate out of it. When? I would say at the rate things are going, that in less than two years we will have a major crisis with the dollar.
But, for now? The market may do anything. Any kind of investor panic could send it back to the old low or lower. Continued belief there is a recovery could keep it going up.
Set your stops and watch the dollar (a rally may cause a sell off in equities by people who were fleeing the dollar) and watch what bonds are doing.
JanPaul
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