I’d ask, what’s the timeframe? As I write this post, Sunday October 27, 2013, the S&P 500 futures are at all-time highs 1760. The market is up 22% for the year, so far. At this point, I can say that in the short term it looks like it is going up, in the long term the market naturally goes up because businesses are supposed to make money. However, in between all the going up, there will be a time that the market will go down or at least go sideways.
As an eclectic investor the key is to figure out how to make money in this environment. The VIX, which is the measure of volatility of the S&P500 is at 13. The range has been between 12 and 22 this year. Most people take the VIX to indicate the fear of level of the market. It seems that at 13, being at the lower part of the range, the market is expecting things to be calm the rest of the year.
From my perspective, I’d be cautious. I’ve been cautious all year and the market has been outperforming my portfolio. It is very difficult to predict the market. If it were easy I’d be super rich. Is it time to turn bullish? Have you ever been at a craps table that has been on a roll for 60 minutes, and you are expecting that 7 to kill the roll? That is how a feel about this market.
The earning season has been a mixed bag. Boing reported a great quarter, while Caterpillar reported a horrible one. Also, the stocks that are the innovators, like Apple, are not anymore. Apple came out with a new line of iPads this week. The new iPads are faster and lighter, yawn, that’s it? Where is the next killer app?
What is driving this market up? Maybe it is the feeling that the market has taken off, and you are being left behind. All those hedge fund managers trying to play catch up. Maybe some individual investors that are just getting the news that the market is going up. Of course we can’t leave out all the cash that the Fed has injected and is still injecting in the system.
At some point the market will stop going up for a while. The Fed will take away the punch bowl. The hedge funds will run out of funds to invest and will want to cash out their chips. This is just when the individual investor will start coming in to the market. So, as an individual investor, be careful out there. Don’t start betting your life savings on a craps table that has been on a roll for over an hour. You can bet a little though because you never know.
Thanks for reading. Have an eclectic investing week.
P.S. By the way, I apologize for not posting last week. I’ve been super busy on several projects. I’m going to reduce my writing schedule temporarily to once a week for the next couple of weeks. Look out for some videos and quotes I’ll be posting instead.