I don't see how the current rally in the major U.S. Market indices can continue for much longer, which I indirectly referred to in a recent article. By this, I mean an ensuing wave or potentially waves of further financial crisis seems inevitable, whether it be the much talked about commercial real estate bubble or continued bank failures via loan losses as ARMS reset and the US economy sinks further into recession ( despite whatever the doctored government statistics are telling you). This being said I think the rally in the Dow may have legs to make it back to 10,500 or so, but not much if any further past that.
I come to this conclusion for a number of reasons, but mainly due to my conviction this will be a double dip recession caused by the previously mentioned financial crisis as well as rich valuations, especially when compared to those around the world. Of course there are several exceptions ( referring to the entire commodity complex - most notably Oil, Gas, Base Metals, Precious Metals and the Entire Agriculture arena) but those industries that require high capital costs other than commodity producing entities are in for a rough road. But ultimately It comes down once again to ridiculous valuations on almost the entire financial sector. I mean how many investors who own large money center banks even understand their balance sheet. I know I have stayed away from the financial industry my entire investing life solely due to that reason. I mean I don't understand why people invest in those entities which have negative cash flows. But the fact is they do and I think it is more likely than not there is a lot of this going on as reflected in the current market prices.
Even if I'm off base here, there is still limited upside in the U.S market. I would much rather be invested in the Canadian Markets, Australian Markets, Honk Kong, New Zealand and if forced to speculate, I would most definitely focus on Brazil or even Russia as opposed to any U.S financial company. I want to be invested in Canadian miners, natural gas, Canadian Oil Sands and Agriculture or Australian and New Zealand Mining and their respective agriculture industry. Honk Kong, though many Indices there have doubled from their lows, still offer bargains left and right if you look in the right place. I think I made my point.... The U.S market, even if it manages to avoid another financial crisis, still leaves investors with very mediocre returns.
Just my 2 cents -