Currently, I’m up 14% for the year, significantly beating the S&P 500, Dow Jones, and Nasdaq indexes. The market is in turmoil over the currently subprime lending crisis. For the past two months, the market voilatility has been extremely high, 200 point ranges in the Dow Jones Industrial Average index are now nothing unusual. I’ve personally been on the sidelines (definition) since early June. The high voilatility started my doubts in the market, and then the market experienced a rally to 14,000 on the Dow Jones Industrial Average due to a short squeeze (definition) moving the DJIA index up roughly 230 points. I viewed the market as overbought and too risky, and decided to wait until I find a good re-entry point. My current thoughts of when that time for re-entry will be is unsure, since the market has too many redflags that indicate we have no reason for the market to significantly climb higher. Most investors are looking for a fed fund rate cut, but I personally think the idea of a rate cut is ridiculous. Fed chairman Ben Bernanke has been stating for over a year that the biggest concern is inflation, and has stated that our overall economy is doing well, with moderate growth. To hope that the Fed will cut rates and usher in inflation problems again, simply to help out the stock market while loosing control of our economy’s growth and stability (note: the market and the economy are two completely different entities), and to help those individuals who made risky loans, is just wishful thinking.
Since I just created this blog today, I’d like to quickly recap my portfolio for the year. In February I went on the sidelines (definition) because I felt the market was unstable and had too little reason to climb higher, and two business days later, the market had a correction. My timing was so fortunate, but my reasons for going 100% cash were justified. The DJIA dropped roughly 400 points, and I was able to sit comfortably at my desk and enjoy not having to lose any money. I continued to stay out of the market as there was chaos for about 2 weeks. When the DJIA went down nearly 1000 points and was in the low 12000 range, I re-entered the market, investing in what I consider low risk investments, such as ETFs that mimic DJIA and S&P500 indexes.
As I write this entry, I am roughly up 14% for the year, the DJIA is up roughly 6% for the year, and the S&P 500 is roughly up 3% for the year.
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