Rafael Grillo

Sucker's Rally Approaching an End

Rally? I am not sure I would call the recent move a rally. We are stilll struggling to stay at Dow 8,000. Just 6 months ago 8,000 was unfathomable. For me, it was more a recovery of an irrational, panic-driven un-rally (yes, irrationality doesn't always have to be exhuberant). Does it mean we should expect further gains? Nope. Buit it doesn't mean we have to brace for doomsday either. At 8,000 we already are in bad shape. More than ever before, it is a stock-pickers market. Great time for a 25 yr-old to add to his S&P 500. Not so good idea for the rest of us. I agree with most: be nimble, remain unemotional and enjoy the volatility. It's going to be a trading range for a while. Don't waste your money trying to buy for the long-haul. Make the quick buck and call it a day. Inflation is coming (the only way to cope with the excessive leverage), so the pain is here to stay for a long time.

3 Reasons I Think a Bull Market Rally Is Imminent

The depth of the finacial and economic crisis is such that I don't envision a sustained bull market until well into 2010 or beyond. This is not your normal recession. The economy needs to correct years if not decades of excess. It needs to resettle at a level sustainable by true productive output, and even that needs to account for the re-payment of the gigantic debt that financed our excessive living standard of the last decades. That means dramatically lower real income for consumers and, correspondingly, far lower revenue for companies. The economic shockwaves are not over. Everyone is looking at the Government to bail the economy out, but the Government has not limitless resources. Taxes will have to increase, further dragging recovery. We can not borrow our way out of a crisis created by borrowing in excess. As much as it hurts, as an economy we're toast for the next decade. Yes, there will be bear rallies and you could still make money in those, but as a long-term generation of wealth, the stock market will be compromised for the years to come. If any, it will be a stock-pickers' market. Commiting to or paying atention to broad indexes will be foolish. What it pains me is that those who have been disciplined is saving and investing are the ones who will pay for the party, while the irresponsible people who lived large and accumulated credit card debt will simply be bailed out.