Right now, I am sharing MJ's brand of pain. I got out of my FAZ near the top, on the very day he wanted to get out of TZA, and I was looking like a genious, so naturally I ruined that by buying back into FAZ too soon. Now I'm underwater on that trade.
But there are too many whiffs of something rotten in the system for me to be bullish, so I'm staying the course for now.
BAC diluting further, just announced. Another big AIG loss. MFGlobal implosion a week after Corzine swore all was well. Jeffries saying they're fine, nothing to worry about, move along. Greece nearing chaos, with GPap now holding a one-vote majority. Berlusconi shaky in Italy. No real resolution to European debt, and forget about U.S. debt.
Lots of wobbly dominoes, lots that could go wrong.
Then again, it could just be the wall of worry the rally climbs. Time will tell.
I think the last part of your statement is the most telling. Even with of all of these world issues, the market has not seen the double dip that so many are calling for. The first dip down to S&P 666 was obviously caused by the financial meltdown, but that occurred before anyone knew the government was willing to bail out the banks. Everyone feared the worst and it was reflected in the market. Had we known about the bailout before the crisis, we never would have seen 666, not even close. So now that we are aware of government bailouts, we are less likely to see S&P 666 again. I realize this may sound way too simplistic, but I really think shorts are over-analyzing every single aspect of the economy. We have a government that refuses to let things get any worse than they are right now. They're willing to throw trillions more into the system over a period of time to keep things afloat. If things get worse, the politicians get voted out. So no one in office is just going to sit there while the whole system collapses. They'll keep throwing money at it and raise taxes later.
At the end of each one of these statements, I always feel the need to reiterate that I do not agree with what the government is doing. However, if they're going to telegraph their every move, then why shouldn't I trade the market accordingly? Why would I think all of the banks would fail when we already know they won't?
Here's my strategy:
S&P over 1300--40% long, 60% cash S&P between 1220 and 1300--50% long, 50% cash S&P between 1100 and 1220--75% long, 25% cash S&P below 1100--All in