September 17, 2009

Wake up Rip
On the day before 9/11, September 10th, 2001 the DOW closed the session at 9605. Last Friday, on the eighth anniversary of 9/11, the DOW closed its trading session at 9605. If you had been asleep for the last eight years, you would have figured you hadn't missed anything. The market hadn't moved one point. But for those of us who participated in these markets over the last decade or so, we know that four of the past eight years were the most volatile in history. We know that the market hit an all-time high in October of 2007 (above 14000) and a new low of about 6500 this past March. So how does an investor, other than Rip Van Winkle, play this market? The answer may lie in the "greater fool theory" This theory suggests that as long as someone is willing to buy something from you at a higher price, than there is value in trading something you believe might be a bit over valued. With all of the current government spending, trillions of dollars to say the least, stocks will probably power higher. With interest accounts yielding zero percent and pushing people into equities, stocks will probably go higher. As a trader, stocks will go higher. As an investor, which is what we should ultimately aspire to be, make sure that you have the solid gold investments that can stand another nasty correction. This is the most significant upward move in stocks in the shortest period of time since 1933, and in 1933 there was a second dramatic fall that scared out many traders (retracing over 70% of the rally), but the second drop proved to be the low for generations.