March 8th, 2011 16:36 EST
Wall Street: Is the Party Almost Over!
About a year ago this week, just before the one-year anniversary of this market rally, there were about 45 IGVSs priced 15% or more below their 52-week highs. The market seemed to be entering a corrective phase, but it just never happened.
A year later, the market statistics, all of them, are shouting at the top of their lungs -- the correction is coming! The correction is coming!
Portfolio "smart cash" is at pocket-hole-burning levels; less than 3% of all IGVSI stocks are even close to "bargain" prices; new 52-week highs have more than quintupled new lows; and issue breadth has been exceptionally positive.
Those of you who are "in the know" will recognize "smart cash" as the type that is created by targeted profit taking plus dividend and interest income. It reflects an Investment Grade Value Stock Index (IGVSI) that has surpassed its pre-financial crisis record high -- in spite of the fact that all the other averages remain below theirs.
Most (equity heavy) Market Cycle Investment Management (MCIM) program portfolios are at all time high profit levels; income heavy allocations have fallen victim to the buying panic of stock market speculators, higher interest rate expectations, and overblown concerns about state and municipal treasuries.
So, why aren`t you taking profits and positioning yourself to take advantage of the new bargains that will (sooner or not much later) be sauntering down the runway?
If you have not been raising cash, or have not taken profits, one or more of these things is happening:
You are being greedy and have reset your profit-taking targets higher than 10%.
You don`t have profit taking opportunities because you never took advantage of 2008 - 2010 bargain opportunities.
You were unable to add to your portfolio when prices were lower.
You don`t want to be burdened with short-term capital gains.
You think that the rally is going to last forever.
Clearly, we are still in a rally. But the longer and the faster we surge upward, the more likely that the next correction will be painful -- and there absolutely will be another correction. This rally will celebrate its two-year anniversary on March 9th. How much longer do you think the toga party will last?Over the past 40 years, if you had purchased Investment Grade Value Stocks during every market downturn and sold every one of them each time they achieved another 10% profit -- just how much better off would your investment portfolio be today?
Always keep in mind that there is no such thing as a bad profit!
Now what is that Market Cycle Investment Management methodology all about?
Professional Portfolio Management since 1979
Author of: "The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read", and "A Millionaire`s Secret Investment Strategy"