Time to Sell?

Yesterday, I sold almost all my equity-based positions. I also called my sister and suggested she sell all of her stocks and mutual funds. Of course, you should do your own due diligence, but as of August 3, 2009, the S&P 500 closed at 1002.63, an annual high. The potential for further upside does not seem to justify the risk of holding equities. My remaining major positions--held in a retirement account--include only an inflation-protected bond fund; a GNMA fund; and a corporate bond fund.

My earlier prediction that the S&P would rise to a range between 920 to 950 proved accurate. I made my prediction on April 1, 2009, when the S&P was only 811.08.

More recently, on July 2, 2009, I bought commodities, especially natural gas commodities. Within a month, some of these positions increased almost 20%.

Any economic "recovery" without rising employment will be short-lived. Right now, I see unemployment staying at 7 to 9%, which will suppress wages and disposable income. We will know more on August 7, 2009, when the BLS releases the unemployment numbers.

At some point, it will make sense to jump back in the stock market. Right now, though, I agree with Hilary Kramer's analysis, which can be found here.

Disclaimer: The information on this site is provided for discussion purposes only. Under no circumstances do any statements here represent a recommendation to buy or sell securities or make any kind of an investment. You are responsible for your own due diligence. To summarize, I do not provide investment advice, nor do I make any claims or promises that any information here will lead to a profit, loss, or any other result.

Comments

[RiskReturnO...:]

Another way is to sell SPY 1000 call options to take in some premium while you wait for the market to break up / down.

Aug 04 11:11 AM

[Mad Hedge F...:]

Good move. There is no doubt that the next trade from here in stocks is a sell. Buying NASDAQ on a 12th consecutive up day, the S&P 500 on the back of a 130 point move, and the Dow on top of a 1,200 point pop is not what great fortunes are made of. After stopping out of my own shorts in the 880’s, I have been holding back, holding back, holding back. See my warning not to sell too soon . I have never been one to fight the tape. The only trader who is always right is Mr. Market. The earnings to support a full fledged bull market are not just there. Deleveraging worlds don’t support expanding earnings multiples. It all works for me because the more it goes up now, the bigger the fall later. Even the raging bulls are warning about a “W” shaped recession and another market dive in 2010. How finely do you want to trade this thing? It’s clear the big core shorts at the major hedge funds haven’t budged, and that most of the recent low volume action has come from day traders, momentum players and CTA’s. All we need now is for mom and pop to come in and ring the bell at the top. Is 2009 going to be replay of 2008? Is a “Sell in May and go Away” to be followed by another October crash? If your friends’ long positions make money from here, just revel in their good fortune, and let them pick up the dinner check.

Aug 04 11:23 AM

[Mmarrkk:]

A little dangerous trade there; if for some reason you guess wrong, you'll have to sell someone those SPY's at 1000, no matter how high it goes.


On Aug 04 11:11 AM RiskReturnOptimizer wrote:

> Another way is to sell SPY 1000 call options to take in some premium
> while you wait for the market to break up / down.

Aug 04 11:23 AM

[Prudent Man...:]

Swapping the risk of holding equities for the risk of holding cash in an equity market that only has momentum going for it rather than fundamentals is reasonable to me. Oh, the market is a "discounting mechanism". Yes, it gives one a good indication of how many fools are pushing up stock prices but is zip on economic forecasting.

What is the risk of your cash falling 10 percent or your equities? And if you have cash during higher interest rates, which would indicate stagflation, would one be better off holding short term top quality debt and rolling it or holding equities?

Everyone must make choice. Most trader/investors, obviously, would rather follow the crowd than analyze their situation and make a decision. The markets of 1999-early 2000 are excellent examples of buying a pig in a poke. Then when those who wanted to make money without earning it focused blame on their politicians for their own ignorance and greed as they are too weak to accept responsibility for their own greed.

Economics and investing is a social science not a physical one. Therefore we all make our decisions based on how we see things. I see a worldwide monetary balloon ready to burst. If I am wrong I only have my money. If I am right I can roll short-term debt.

To me, it is all about the assumption of risk and comparing that risk with potential reward. If your are clueless as to how to measure the risk and the reward you certainly should not be in equities.

Aug 04 11:25 AM

[JGL:]

Your natural gas went up 20%?? Look at UNG does not look like it, but......I believe u!

Aug 05 08:02 AM