First caveat: there will be a few hundred points of volatility in the DOW 30 for the next few weeks but I'm calling this as the bottom. The DJIA closed in the 8200's today and I feel like we're done selling. Maybe get as low as 8,000 but I think what we are witnessing is a bottoming process.
I am hearing from radio / TV that they are calling this the Obama Recession because people are selling stocks, etc., to avoid increased capital gains taxes.
I don't buy that. Yes, there are anectdotes about that but there's also anectdotes about people seeing flying saucers. I think we had a huge pop in the bubble, the economy is in the tank, financial companies are laying off like crazy and the stock market is as low as it's gonna get, plus or minus a couple percent.
So, I honestly think you're pretty safe to start buying or adding to your diversified, well managed mutual funds at this point.
Would I buy individual stocks? Not too many of them. LOTS of risk still exists that GM or Ford may go BK. However, if you buy diversified portfolios, you should be okay. Try to buy American if you're going to buy based on this recommendation.
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Calling a bottom presupposes that the market has viable trends, which is not defensible. It may look like it, but the appearance is an illusion. This is not to say th4e market does not have a herd mentality, it is just to say that any number of responsible academics have published papers demonstrating that the market is news driven and apparent "trends" have absolutely no predictive value because they derive from the past, not the future which is unknowable.
That said, I must admit I went to 100% cash in my deferred comp fund in early September baased on market behvior and am contemplating rotating back in in increments at intervals in coming months. If and when the 50-day average crosses the 200 day line northbound for major indices I may be persuaded it's reasonable to do more than that.
He who swims with the sharks tends to get bit. Watch your dorsal fin.
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