Tom Konrad, Ph.D.
The current rally from the March 5 bottom has been breathtaking, especially in Clean Energy, with my Clean Energy Tracking Portfolio up 70.5% since it was assembled at the end of February (as of May 1), 11% higher than it was at the three month update last week, and the S&P 500 is up 41% from its March low. Even in a better economic climate, gains of this magnitude would have me running for cover. In the current economic climate, with a gigantic mountain of debt keeping consumers out of the stores, makes me feel this bear market rally does not have much farther to go.
This is mostly a gut feeling, but when it comes to predicting market moves, most methods (including my gut) are pretty worthless. I’ve actually felt that this rally was on its last legs for the past month, and it continues to head higher. It’s easy to predict the market, and then point back to the times you have been right, which is why I don’t generally make calls like this publicly.
On the Sidelines
Why am I making the call? Because I don’t have anything to say about specific stocks. The recent moves have been so extreme, I can’t find any stocks that I’d want to buy anywhere close to these levels, and so I can’t get excited about writing articles encouraging anyone else to buy them, either. Maybe I’ll research something to short, like First Solar (FSLR)
Until then, I’ve been selling covered calls on what I do own, to hedge some of my downside risk. Unlike selling Cash Covered Puts, a bullish strategy I’ve discussed in the past, selling covered calls reduces your overall risk, so most investors (even relatively inexperienced ones) can get the necessary options permission from their broker. US laws even allow selling covered calls in IRAs.
DISCLAIMER: The information and trades provided here and in the comments are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. Please take the time to read the full disclaimer here.
Note: On June 2 when this was published, the S&P 500 closed at 944.74.
I will consider this call to be “correct” of it falls by 20% (to 756) before it advance 5% (to 992)
As of 6/22/09, the S&P is down 5.2% over the last 3 weeks.
So… it looks like your call was wrong?
Nevermind. I see in your recent article that you are still bearish.
By the way, props for mentioning predictions in later articles, whether they are right or wrong. Some authors cherry pick their pasts to give them rosier finishes, but seriously discredit themselves when people find out. I appreciate that you do not. Good work. 🙂
With the S&P closing today at 987 (less than a 5% gain), it’s still too early to call this one right or wrong, but it’s looking like it’s more likely going to be wrong than right.
Thanks for noticing that I try to be evenhanded (which is why I provided the specific numbers above, in the first comment. This is not only a service to readers, but a service to myself…
An investor who loses his humility is likely to find his money going quickly after.