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Exile on Main Street

Jan. 02, 2011 12:37 PM ETAAPL, GLD
Ted Stamas profile picture
Ted Stamas's Blog
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The problem with following stock shaman like you see all day on CNBC is that you don't know if they are investors or traders. They never give you a timeline as to how long to hold a security. One day they love a company and if it goes up a meager 2 points in a momentum move, they'll drop it like a bad habit. I don't like to invest that way. I want to be like Warren Buffett and buy a piece of the business. However, there are times to sell. Now may be one of them. I just don't know because I've gotten it wrong with one of the best market rides since the 1940's. I really don't make many market or security calls, but in 2010, I got three wrong: the direction of the market, Apple Computer (AAPL) and Gold (GLD). I still believe that all three of them are overvalued, but they've got the wind at their backs.

Ever since the New York Stock Exchange was founded in 1792 with the Buttonwood Agreement, there has been a rift between Wall Street and Main Street. As you are probably well aware, things haven't changed too much in 200 years. Just look at the returns of the markets in 2010: DOW up 11%, S&P 500 up 12.8%, NASDAQ up 16.9% and the Russell 2000 up a whopping 25.3%. Main Street, on the other hand, has a distinct problem of unemployment hovering around 10%. The lofty unemployment rate coupled with underemployment and individuals who have stopped looking for work, puts the downtrodden closer to 17%. That's a lot of people on the dole.

For the majority of my life, I have been a Main Street guy. Still am and probably always will be. I am currently putting money under the mattress in for form of CD's and savings accounts and have been doing so for almost 2 years. I also have a percentage of my money in short ETF's which you are already aware of if you have been following this blog. I see the economy from the ground level: food stamps, soup kitchens, foreclosures and muggings. The rosy scenario that a majority of Wall Street pundits are promoting isn't what it's like on the front lines. This is why I'm staying out of the market for the time being. However, the "little guy" or Main Street may be getting back into the market with all of the current bullish sentiment after staying on the sidelines since the 'great recession' wiped out a great number of investors. This could be a bad move.

Throughout the years the markets have been very kind to my portfolios and I thank them for that. This includes all of the Wall Street "experts" who can't seem to agree on anything. You've got to parse out the white noise and get to the transmissions that are down in your range. Right now, the sentiment is extremely bullish and I heard this same tune in the late 1990's when there was a "new normal" and stocks were just going to keep going up. I am a subscriber to ValueLine and the majority of the securities I am interested in have very little room for growth in the next 3-5 years according to their reports. In fact, some will have negative returns with no dividends to pay out if you believe in ValueLine. Many of these stocks are in the green technology, mobile computing and cloud computing sectors. Bubbles abound so buyer beware.

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