S&P 500: 1146
I gave up on investing in 1996, when the bubble first started to form. Now, nearly ten years later, the market is far more reasonably priced, but I am at an age where long term investing holds little allure. So, I will buy shares, hold for a while, then sell and pay my taxes.
From a business cycle perspective, the best time to own stocks is when interest rates are falling, monetary liquidity measures are accelerating in growth, confidence in the economy is on the rise and profits are recovering back up to the long term trend line. In this cycle, that all ended around 3 / '04. Since then, the key fundamentals have slowly deteriorated and went fully negative over the 2 / '05 - 3 / '05 period. I do not see us in the kind of squeeze that kills an economic expansion, but as going through a period designed to enforce an economic slowdown to remove some of the inflation pressures from the system. The Fed would strongly prefer to stretch this expansion out another four - five years if it can.
For my part, I intend to wait out this interval until inflation pressures abate and market short term interest rates begin to weaken a little. At that point, it would be a good time to see if aggressive exposure to the market is in order.
In the meantime, fundamentals can yield up the occasional trade. One measure I like is the direction of Federal Reserve Bank credit. http://www.federalreserve.gov/releases/h41/Current/
This account is down so far for the year, and if the Fed is to maintain a policy of moderate liquidity growth as I suspect, They will have to add nearly $60 billion to Their account by year end 2005. I expect the FOMC to begin stepping up purchase activity over the next 4-6 weeks. If the Fed wants to buy, may be I should too.
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