As Trend Followers, our main focus is always on the direction of the major trend (along with our sell stop points) and not on the fundamentals, although from time to time I have voiced my opinion about the current economic recovery, or the lack thereof.
In a recent interview on CNBC, Meredith Whitney, who does not mince words, commented on the current overvalued stock market and the odds of a double dip recession. Take a look:
I agree that a double dip recession in form of a “W” (or several Ws) is a distinct possibility, especially once the stimulus runs out.
While such a scenario will be a death blow again to those simply holding on to their investments, it will offer us trend followers the opportunity to sidestep the downturns via our sell stops and be onboard when the uptrend resumes.
To be clear, as was the case in 2008, trend tracking will not get us out on top of the market, nor will it get us back in at the exact bottom. Both points (the top and the bottom) need to occur first before they can be identified.
However, avoiding the brunt of the sell off, and participating in a good part of the subsequent up move, will certainly help your portfolio avoid a serious haircut, whereas mindlessly hanging on to your investments, regardless of market direction, will have dire consequences—again.
Comments 4
What doesn't make sense is why does she acknowledge that the market is detached from fundamentals and then act as if she has no explaination for it?
Most of the poeple I listen to (incl. Peter Schiff) seem to realize that the market is moving up based on economic indicators artificially influenced by extraordinary government meddling.
Maybe she didn't want to say that because it would also mean that she would have to admit that she couldn't put a time frame on when it will all end because no one knows just how far the .gov is willing to go and when all the stimulus will actually end.
G.H.
I did see Goldman Sachs or any other Wall Street investment organization look the other way when the money was being doled out. In fact Goldman gave Buffet terms we would all kill for 10% on his 10 billion plus warrants. Since GS is so shrewd, why did they cough up 10%. Nor did GS look the other way when They got 20 billion of gov money via a bankrupt AIG propped up by 187 billion of govn meddling.
It is just so pathetic for most of your readers to blame everything on the govn especially when it was a Repub regieme that started giving out the cash to its buddies on the street. Yes, the mkt is decoupled in the short run by all the govn cash. I would ask why did it happen. I hear the raves of GS 16 billion record bonuses. All that is govn (mine and your) cash. It wasnt earned the old fashion way
Ulli,
The lady in the video seemed to be full of hot air like lots of these opinionated egotists out there.
Ulli,
I believe that lady had some good things to say, but she covered herself quite well by not sticking her neck out too far because nobody knows what any outcome is going to be for sure, especially once the depression is in full swing later on.