Should you play this rally?

Oct.13, 2008 in Market Outlook

While I agree we could have a nice and fairly long rally, set the stops on what you have.

The U.S. is losing economic power to Asia and other emerging markets and that decades long trend is not only not reversing, this crisis is making it worse. As we are pulling back and will see 144,000 businesses (by some estimates) close, retail sales in China are up over 23%. While their exports and manufacturing are well of peaks, they are not anywhere near crisis. They are growing and even if their GDP drops to 4% (most think it will stay higher) that is still a drain of economic power from us to them.

The 50% rally after the 29 crash was finally overwhelmed by the consumer spending less. This too, is a consumer recession that can get a whole lot worse, rally or not.

If you are going to play this rally, don’t play it as a buy and hold. When the DOW recovered 50% it then dropped for 2 years.

Today, we may see inflation keep the price up but, you will still lose 90% of the value if you are in the wrong stocks and consumers keep cutting back.

Did you like this? If so, please bookmark it,