www.goldavalanche.blogspot.com
Answer: If you want to risk your money, go for it. As for me, it's too risky of a play at the moment, because we are stupendously close to potentially receiving a tried and tested reliable buy signal.
Here's an overview of what US retail investors have been up to.
- Since 2006, $600 billion piled out of equity funds.
- At the same time, $800 billion flooded bond funds.
- In the past TWO WEEKS, $35 billion has flowed back into stock funds. $19 billion of these funds are in long-only.
Source: http://www.cnbc.com/id/100416162
Ok, so here's the deal. You and I both know that in order for a new primary bull market trend to be confirmed, the Dow unequivocally must break it's old high. The $35 billion of retail money which has flowed back into stock equity funds is thus nothing short of speculative. This kind of herd move is potentially dangerous. Sure, the herd could be right that a new bull market is upon us, but if the Dow can't break its all time highs while the trans continues to make new highs, all that speculative money that flowed back into stock funds is at serious risk.
This is, incidentally why I am still holding corporate and government bonds, as well as gold and gold equities.
So, I will repeat my words of caution to my fellow retail investors: If you have cash on the sidelines and want to use it, I would be weary of going long on stock funds just yet. At the same time, I also would not short this market. It's essentially a no man's land at the moment. If you are itchy to put your cash to work someplace, please do it cautiously. Better to miss 5% of a bull market that will surge 50%, than to get in at near the top of a bear market that will slide 20%. At this point, the Dow only needs to go roughly 150 points higher to beat it's all time high. Waiting for that moment now is not only wise, but prudent. As long-term investors, our timing doesn't have to be perfect, but we do not want to get stuck on the wrong side of the primary trend.
In fact, I might even wait for the Dow to double confirm a breaking of its old high before buying into more equity funds.
Happy (and patient!) Investing,
R
