For openers, let me say that I don't have any special skill in predicting market bottoms. If I did, I would be would make stock trading my day job:-) However, I am a student of the market, and enjoy trying to guess the short term direction.
For reference, I base my assessment on interactions, content and perspectives from people with whom I have contact, e.g. family, friends, neighbors, colleagues, and personal finance bloggers, most of whom are not in the financial business.
Here's what I have been seeing and hearing:
Finally, the Fed has been lowering interest rates since August, 2007. Historically interest rates changes can take a couple years to have impact. Eventually, there will be tremendous liquidity in the economy, as soon as banks have confidence to lend again. Unfortunately, I also believe there will be unintended consequences, such as the formation of a new bubble.
While I still believe the market will be choppy, I predict there will an overall uptrend, with several good rallies, in 2009. I'm not ready to be "all in" yet, but I will start trickling in money that we cashed out of the market in late December, 2008 over the next few months. In the past, I wrote I would not add new money until a Dow 4000 or 12000 occurred. At this time, I am tightening the criteria for new money to a Dow 6000 or 10000, since I believe a bottom is near.
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This is not financial or investing advice. Please consult a professional advisor.
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2 comments:
I agree that when people start talking about the end being near for stocks, thats the time the market starts going up.
We are in a similar situation now as well.
While I agree that most people are seemingly pessimistic and are holding back with regards to the stock market, you also have to look at the age group of the people you are considering.
Most personal finance bloggers (like yourself) have families and are pretty much dealing with the many burdens of everyday life. They had money invested before the recent economic turmoil.
Others (like myself) are young and poor and can't wait to throw money into stocks but do not have the capital to do so.
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