It seems everybody’s bullish, the markets are great, and the Federal Reserve says that we’re still in dire need of “emergency measures” like 0% interest rates (ZIRP), QE Infinity, and all kinds of other tricks to keep this juggernaut going.
You hear people say we’re headed into a new stock market bubble and that you should be buying aggressively. Are we really headed to 20,000 on the Dow Jones Industrial Average DJIA -0.11% , for example, as my friend and one of the hottest hands this cycle predicts? See Dow 20K — Halfway There.
One problem. The time to be buying aggressively was when the markets were horrible and the Federal Reserve’s wild foray into uncharted monetary expansion and new gimmicks for inflating bubbles was just getting started. With the broader indexes up more than double from this cycle’s most recent lows back in 2009 and with many stocks up triple, quadruple or more (including Apple, despite it being so far off its highs from this cycle), one might make the case, as I have recently, that we are already in bubble territory. Sure, I expect the bubble to get bigger before a disastrous pop in late 2014 or 2015 or so, but I think it’s pretty obvious that we are already now in bubble territory in bonds, in stocks, and in a lot of other asset values.
I remain mostly long and positioned for more of a stock market bubble ahead. But my subscribers and I were wa-a-ay ahead of the curve in getting set up for this bubble that we are now in and which is probably going to get worse before popping. A look back at your own historical analysis will help you become a much better investor and trader in the future, and I do suggest keeping some sort of written (or digital) record of your thought processes and analysis as you put your money to work.
I often point out mistakes that I’ve made and hard lessons that I’ve learned. And because I’ve been publishing my thought processes and analysis over the years on TheStreet.com, FoxBusiness.com, WSJ.com, Marketwatch.com and many other outlets, I can easily search their sites for it. But I also rightly point out some of the things I got right. I started publishing my blog on Marketwatch back in late 2009 and here’s what I was writing about the stock markets, which were far below today’s levels at the time.
A couple ideas on how to trade the Money Supply Bubble (November 2009, DJIA at 10,200) - ”And I do think we’ll see a lot of strange asset appreciation turning into horrific and painful bubbles in the next five years … assuming the stock market is actually a part of that bubble – let’s picture the DJIA bubbling up to new highs and hitting 15,000 …”
Three coming bubbles and how to play them (November 2010, DJIA at 11,100) - “So what should we do? Be prepared for another bubble, that’s what. Or several asset bubbles, to be exact.”
The great inflating bubble – (June 2011, DJIA at 12,000) - “I’ll be outlining exactly what ETFs and options I’m trading because of this following chart for my subscribers at TradingWithCody.com, but put simply — this following chart is how bubbles get blown and it’s a large part of why I’m betting so big on a coming bigger-than-ever tech stock bubble…”
I’m sure you can imagine the flaming emails and ad hominem attacks I got for saying back in 2009 that the DJIA could hit 15,000. Wait, what’s that you say? The market is now at 15,000? What’s the big deal? See, that’s my point! You have to swing big when it seems outrageous to be doing so. Calling for a DJIA 15k target back five years ago when the market would need to rally 50% was outrageous, or at least it seemed like it to the mainstream media and most investors/traders at the time. In that vein, I recently started RevolutioNews.com to help people past the mainstream media’s propaganda, hype and fluff.
Now that we’re here at my DJIA 15,000 target just about a year ahead of time, I suggest trimming down, lessening your exposure and waiting for a big pullback before even thinking about getting aggressively long stocks again. It’s not exciting, and I know I lose business because people want to chase the markets at these prices. But that’s OK. The markets seemed boring back in 2009, and that was when I was excited about buying stocks. The markets seem exciting in May 2013 and I seem boring.
To paraphrase Warren Buffett, then — be boring when others are excited. Be excited when others are bored.
Finally, I know you do want a prediction of how this cycle will play out from here. Well, I’m here to excite you (at least a little bit, I guess). The market’s move higher has lasted and can continue to last longer and go higher than most people think. I figure, feet to fire, that we now enter blow-off top territory, taking the Dow Jones Industrial Average to the 17,000 level that I’ve talked about before, probably right around the late 2014 or in 2015 time frame I’ve been giving all along here. Doesn’t mean the risk/reward is very good though. So don’t force it. Be boring.
Cody Willard writes Revolution Investing for MarketWatch and posts the trades from his personal account at TradingWithCody.com, which is not affiliated with MarketWatch. At time of publication, Cody was net long Apple and net short SPY. Follow Cody on Twitter at twitter.com/codywillard.
Cody Willard
@codywillard
+Cody Willard
Latest posts by Cody Willard (see all)
- Dow 20,000? How’s your economy doing? - May 10, 2024
- What’s next for this huge market bubble? - May 8, 2024
- The single biggest threat to the economy and markets - May 7, 2024
- Yup, Google now worth more than Microsoft - May 6, 2024
- The truth about “Sell in May” and precious metals - May 3, 2024
+0.43%
+0.80%
+4.80%