Tuesday, August 4, 2009

Sell Before It's Too Late?

Yesterday, I sold almost all my equity-based positions. I also called my sister and suggested she sell all of her stocks and mutual funds. Of course, you should do your own due diligence, but as of August 3, 2009, the S&P 500 closed at 1002.63, an annual high. The potential for further upside does not seem to justify the risk of holding equities. My remaining major positions--held in a retirement account--include only an inflation-protected bond fund; a GNMA fund; and a corporate bond fund.

My earlier prediction that the S&P would rise to a range between 920 to 950 proved accurate. I made my prediction on April 1, 2009, when the S&P was only 811.08.

More recently, on July 2, 2009, I bought commodities, especially natural gas commodities. Within a month, some of these positions increased almost 20%.

Any economic "recovery" without rising employment will be short-lived. Right now, I see unemployment staying at 7 to 9%, which will suppress wages and disposable income. We will know more on August 7, 2009, when the BLS releases the unemployment numbers.

At some point, it will make sense to jump back in the stock market. Right now, though, I agree with Hilary Kramer's analysis, which can be found here.

Update on June 11, 2010: the S&P 500 was 1002.63 when I made this post. The S&P did go down to 979, but then rose to 1086.84 over the next ten months or so--an 8.4% gain. Although I was wrong about the stock market's direction, the other investments I mentioned--GNMA and TIPs--also had decent gains when including dividend/interest payments. Also, I correctly predicted the unemployment numbers. Where will the stock market go next? I have no idea, but my personal tolerance for risk has gone up. When people start talking about the disintegration of the EU and the collapse of the Euro, maybe it's time to go contrarian--as long as you have 20 to 25 years to wait.

Disclaimer: The information on this site is provided for discussion purposes only. Under no circumstances do any statements here represent a recommendation to buy or sell securities or make any kind of an investment. You are responsible for your own due diligence. To summarize, I do not provide investment advice, nor do I make any claims or promises that any information here will lead to a profit, loss, or any other result.

No comments: