We're Close

We're close... very close to a peak. I said back on March 4 and March 5 that we'd see a heck of a run and that as we got near Dow 10,000 that it would be time to get out. (Look back at those posts) That time is here. Dow 9600 right now with the S&P at 1030. If the S&P breaks above 1050 we have another 10% up move to go. If it doesn't break above 1050 we saw the peak this week. This coming up week and next week will be the tell all. Yes, really.

How will it play out? I don't know. I don't imagine a cliff dropping plummet at least not like Oct 1987. Instead I see a rather gradual decline. Everyone that has been "buying on the dips" the past 6 months will continue trying what has worked so well, but instead we'll continue a slow melting process that keeps them buying in hopes of the move back up. And in the meantime the folks shorting the market that have been getting burned the past 6 months will be too gun shy and afraid to make big bets because they've been screwed over so many times.

Here's the thing everyone, and I know I keep repeating it but NOTHING HAS BEEN FIXED! The gov't has thrown trillions of dollars into the banks and the economy but that's all. Accounting rule changes and smoke and mirrors is not a fix. The problems are still out there... over leveraged banks and consumers. If you look closely at the gov't reports that come out, the consumer is dead. The only spending is being done by the gov't and that can't last forever, nor is it enough to build a strong economy. The consumer is 1) tapped out and 2) scared. Scared of job losses, scared of losing their homes.

The Cash for Clunkers thing was the biggest fiasco. Get people who have cars that are likely paid off to turn them in for one that will require $300-$500 a month car payments for the next 4 or 5 years. And how many of those people thought about the fact that their auto insurance would double or triple also? Those 700,000 people that did this now have less spending money for the real economy. Not to mention the fact that if car dealerships had people lined up out the door of the showrooms, do you really think they came down on the prices of the cars? So guess what, you didn't save a dime.

Anyway, we're close to a peak. Either in the next 2 weeks or after 1 more 10% run. In either case, it's time to start positioning yourself. The bottom of the next wave could possibly just be a test of the lows back in March (S&P 670) or it could be far worse. Have to wait and see how bad things really are.

Commercial real estate will wipe out another 1,000 or maybe even 2,000 banks. Local, state and federal gov't revenue streams are WAY down which will mean higher taxes to make up for it. Don't be worried about inflation yet, that'll come in a few years. Be worried about deflation for the near term.

Now that the baseless rally and euphoria are peaking I'll start posting my thoughts along with tidbit articles that I find. I simply had to wait for this phase to play out.

A friend of mine kept asking me "Are you back in yet?" Nope... I didn't want to risk my retirement money knowing that at the best we'd still be around 30% below the high that was set in October 2007. Sure, I wish I'd caught more of this rally. Even though back on March 4 and March 5 I said this would happen, it even shocked me how impressive the straight up rally was.