As one of my regular readers you know I have been a stock market bear for the past 2 years and have encouraged everyone to put their money into a money market account or a short-term no-load bond fund and for the more adventurous what is called a bear mutual fund that goes up when the market goes down. Just being in cash as outlined in my book would have saved 40% or more of your money.
It looks like the bull has returned - at least for a while. The low that was hit on October 8 was a serious one. As the market has gone up there have been more and more who believe we are in a recovery mode so they are committing funds again. This is true not only for the average investor who has been seriously hurt with the invalid Buy and Hold philosophy, but also the pension and retirement plans of both large and small corporations. Many pension plans (hopefully not yours) have had losses of 30% to 50%.
I hate to tell you this, but those fund managers, as expert as they pretend to be, have no more idea how to protect that fund than you do. Am I being pessimistic? Maybe, but then why did 90% of all stock mutual funds lose money so far this year? The only stocks and mutual funds showing a profit have been bonds, gold and bear funds. You can be sure your financial manager was not smart enough to own any of these.
Well, anyway, back to this new bull market. Many pension plans and funds have been making a small recovery and the investor is again opening his mail from his 401K. It has been too painful to see those losses.
Will this bull last? The current underlying fundamentals say 'NO', but the outlook by market analysts is that next year we will see the return of good corporate profits and better exports to foreign countries. So far it has been the American consumer who has held the market up with purchases of cars and houses. If this can continue we will see some corporate expansion and employment rise again.
The market has been rising on anticipation of that scenario. Unless we can see corporations making decent profits so they can expand their business this shadow bull will disappear in a flash of light. Whoever you work for must make a good profit or you won't have a job. It isn't his fault or yours. He can't afford to keep you unless there are profits.
Let's hope this shadow bull has more substance to it.
(c) 2005
Al Thomas' best selling book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter to receive his market letter for 3 months at www.mutualfundmagic.com to discover why he's the man that Wall Street does not want you to know.
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