Tuesday, December 19, 2006

Smokey the Bear says: "Only you can prevent portfolio losses."

The stock market has a tendency to zig when everybody expects it to zag. This is partially due to the fact that when everybody is optimistic, usually they have already invested most of their money, leaving them with less new cash to invest. At the same time people tend to be most optimistic on the stock market after a period of steadily rising markets. But that may well be at a time when stocks are priced fairly richly, due to the rising market. People tend to turn most bearish on stocks after a period of steadily falling stocks, which because of falling stock prices, turns out to be the time that values are low or reasonable.

Thus, the fact that the top market strategists are uniformly bullish is...?

... a warning sign.

Bloomberg: Stock Strategists Raise Alarms With Call for Rally.


Strategists at 12 of the biggest Wall Street firms agree that U.S. stocks will rally next year. The last year that happened was for 2001, when the Standard & Poor's 500 Index dropped 13 percent.


``People are bullish, and the strategists are too,'' Bernstein, 48, said in an interview. ``We all are.'' The New York-based forecaster expects the index to reach 1570, up 10 percent from its current level, in the next 12 months.


``I'm an old believer that when everyone believes something is going to happen, the opposite happens,'' said David Kotok, who oversees $850 million as chief investment officer at Cumberland Advisors Inc. in Vineland, New Jersey. ``That causes me concern because I'm bullish too.''


I leave you with the wisdom of Warren Buffett:

"Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well."