"There’s no historical precedent for such massive and protracted deficits in a country’s external account. There is no precedent for such a consumption and services-dominated economic structure. And there’s no precedent for anything remotely comparable to the current fiscal and monetary policy regime.
Decades of unfettered global finance have, not unpredictably, fostered progressive financial and economic fragilities. These policy-induced deficiencies have incited increasingly desperate policy measures - and attendant market exuberance. Indeed, it’s all evolved into one epic experiment in unanchored international finance, unchecked speculation and financial leveraging, new paradigm economic structures, ballooning global imbalances and ever expanding monetary inflation. So I especially appreciate Mr. Volcker’s pertinent insights. And to see Greenspan on CNBC touting an equities valuation model and market undervaluation – well, it was just more of the ridiculous."
When considering your options and investing strategy, you must consider your goals and time frame.
If you are young, especially if you have established retirement account that is tax deferred, you can keep a LONG TERM perspective and stay IN the market come hell or high water.
Do you find this surprising coming from me?
Don't, I also have funds in a 401K invested in some 15 products across broad spectrum of investments. The MAIN issue I would ever have is if you atrying to get a LUMP SUM in at any given juncture, easing it in would be better call, IMHO.
Are you buying near THE TOP? If long term, meaning 10 PLUS years or more, who cares? The avg, and even above avg person will not cannot try to TIME enterring and exiting. What WILL happen is these decisions will be dominated by EMOTION. You will gamble near the top because of GREED, you will exit near the bottom because of FEAR....this is what drive market behaviour and price...to the extremes of each.
If you looked at what your portfolio could be today over the last 15 years.....using HINDSIGHT, you would have ignored the last 2 BEAR MARKETS......hung tough and continued to avg into the market.
Problem is, we are emotional creatures, so if you want to be a LONG TERM investor and reap those benefits, then you are best not to ponder daily what your account is worth....ON PAPER.
My own personal mistakes were not that I couldn't identify a BEAR MKT, which I have now twice in 13 years, it was in trying to pick THE BOTTOM. Getting out near 14,000 DOW.....8,000 Dow wasn't a sale? Of course it plunged below 7,000 briefly, but my point was....I had saved my ass from a 6,000 point decline...WHEN was I going to reap the rewards of lower prices?
The answer to that was I had NOT YET mastered my own emotions. I did not believe my own charts which told me a bottom was at hand. I did not trust that THE BOTTOM would hold on a test....or the rising tide was real or sustainable!
I have answered this period before in my blog, tried to be as honest as I can, openly sharing what I'm thinking, my own experiences in an attempt to help others.
I argue from both a fundamental and technical viewpoint. I'm not saying I will leave even my own 401K in under any circumstances, no I will probably go to the sidelines hen I think it appropriate.
But should stock prices go on sale again, and I AM on the sidelines in plenty of time with CASH ON HAND IN WHICH I CAN BUY THE BARGAINS (because what good are bargains if you have NO CASH?) (I am on sidelines in another account) I WILL be prepared to put money to work at or below certain market price thresholds, NOT because I KNOW the bottom is near. I will buy because I know prices have gotten severe haircut, are on sale, and my chances of making money are very good even in the intermediate term.
Timing with LUMP SUMS is important, if you have shorter horizon, buying in 2007 meant you waited until this year to recoup, but you did. Getting scared out in 2009 would have been a horrible decision.
The GREAT BULL MARKET OF THE 80'S and 90'S began with historic highs in interest rates, then during that entire period, falling interest rates. We had an INDUSTRIAL, MANUFACTURING and TECHNOLOGY LED expansion....real jobs, real economy...limited FED meddling....of course then came GREENSPAN.....we exploded.....but there was a price to pay.
Then came Bernanke, now even more historic FED meddling.....one bubble, two, 3? each bubble bursts and causes financial and market havoc.
Are we on the cusp of another GREAT BULL MKT, or is what we are witnessing just a figment of the FED's intrusive meddling and manipulation and targeting of financial assets?
What then should we expect to happen when that game ends or fails?
To be continued......