Is The Stock Market Overpriced?
The Dow has currently been up 24 out of the past 27 sessions. From what I’ve heard, this is a record. Its NEVER done this before!!!!
And its not like the US economy is rock-solid. According to Chuck Butler of Everbank.com, the US unemployment rate should actually be at 12% instead of the 4.5% that the government actually discloses. Also, all the emerging markets have had a higher GDP growth last year than the US. This has also never happened before!
And the US Dollar is weakening against almost every other major currency there is. Not exactly a confidence builder!
There’s also a saying in the stock market, “Sell in May and go away” which refers to the historic fact of summer stock price slumps that happen more often than not. There’s also studies that show the major returns occur between October and April every year.
Given all this good news, is the stock market currently overpriced? A lot of my stocks have done ok and a few have done exceptionally well. (Anglo-America(AAUK), BHP Billington(BHP) and Yumana Gold(AUY) are up over 30% in the past 6 months). The Canadian Income Funds I own are mostly break-even but they pay out around 1% every month so I’m not really concerned, especially with the Canadian Loonie strengthening against the USD and hitting 90 cents now.
Even stocks in the retirement accounts like Petro-China(PTR) have finally shown some signs of life! After jumping from $109 to $140 and then dropping back down to $109 its back up at $129.
Most of these stocks that I’d like to hold for the long term. There are however, several stocks which are a bit more speculative. They’re roughly 10% of my portfolio and about 1-2% of my net worth. So even if they were to drop it wouldn’t negatively affect my lifestyle.
That being said, no one likes to lose money. Especially if it looks like everything is stacked against you.
I’ve heard of some people liquidating 50% of their positions and taking the summer off. Doesn’t sound like a bad idea, but there are tax consequences to this. Plus, if you don’t do anything and the market comes back in the fall, the commissions and taxes were unnecessary. Plus you might miss a big move.
What are you guys doing?
If you found this post helpful, consider donating to my coffee fund!![[del.icio.us]](http://images.del.icio.us/static/img/delicious.small.gif){kind=small}
- Rogers Still Bullish On Commodities Jim Rogers recently gave a presentation in Vancouver, Canada where he reiterated his belief that we're in the middle of a commodities bull market. His logic is simple: the supply of paper currencies in increasing while the supply of hard commodities like aluminum and copper is dwindling. He also believes......
- Closing Out JRCC In an earlier post on investing on news, I had sold puts on JRCC.Well JRCC was up sharply in the past few trading sessions. I closed out my position by buying back my naked puts and netted a 38% profit (sold the puts for 1.95 and bought them back for......
- Cheney Betting Against The Dollar Not exactly fresh news, but its been reported that Dick Cheney, our beloved vice-president is betting against the US Dollar. He has tens of millions of dollars in foreign government bond and currency funds and international and emerging market stocks. His excuse is that it's in a blind fund and......
Related Websites
- Cagle Cartoons and Social Security: Ignorance in Ink. Here's a cagle cartoon I saw in the paper last weekend. I thought I'd blog about it because I've heard the same sentiment from various people and read it on different corners of the blogosphere. It's stupid, well actually dishonest, because the GOP plan to privatize social security was never......
- Investor Panic Sets New Records for Investment Firm Websites and Call Centers It would appear that the majority of Americans with retirement accounts have really been sweating it out during this latest round of Wall Street negativity. The Wall Street Journal is reporting that Fidelity's website saw web traffic increase 25% higher than it's all time high last week amid the flood......
- Co-op wins it for Which The highly rated "Which?" Award for Best Financial Services Provider, has gone to none other than the Co-operative Bank. Despite the recession, the bank has continued to perform well with its client base increasing significantly in recent years, largely due to their ethical investment policy. Since 1992, the bank’s commercial......
[All content is copyright of Living Off Dividends & Passive Income]
May 8th, 2007 at 7:34 am
Slow and steady wins the race! I plan not doing Anything!!!!!!!!!!!!
My Mutual Funds/ETFs is on cruise control
May 8th, 2007 at 10:28 am
Same here. Index funds and ETFs for me. Not selling, not speculating. Staying the course.
BTW, who cares about the DOW? It is not an indication for anything. The DOW is composed of only 30 large stocks. Other, more diversified indexes, such as the Wilshire 5000 or the S&P have not done as great. In any case, corporate earnings have been going through the roof which is one of the reasons for the stock market rally.
Although it may be fun to talk about the stock market, I make it a point to DO nothing about it.
May 8th, 2007 at 5:04 pm
What are we doing?
Well…mostly buying more stock. I just took a position in ERH and I’m keeping an eye on HANS.
February 16th, 2008 at 7:02 am
What am I doing?
Trading the volatility, that’s what!
And from a trading POV, I really don’t care which way the market moves, just so long as it moves!
December 14th, 2009 at 7:55 am
Well, seeing how the two years after this was written had one of the worst downturns in the stock market since the Great Depression, I’d say that yes, it probably was overpriced. Of course, hindsight is 20/20, and as to whether it is still overpriced today, I honestly don’t know.