Time to turn bearish

The markets have been crazy i think.

With the Dow Jones Industrial Average moving from 11000 to 13 556 levels, the Nasdaq composite moving from 2000 to 2500 and the S&P moving from around 1200 to 1522 over the last one year or so, It is not hard to conceive that the market might just go into a recession soon. To be honest, we don't know when but when it happens, it might just be one big market correction ahead.

Firstly, although i am not much a fan of economics, i have to admit that the twin deficits in the US might just cause US to go into recession. When that happens, the whole world will fall alongside the US too.

In China, the stock markets have been overheated for a while now in my opinion. In india too, ordinary folks are rushing to open brokerage accounts to capitalize on the booming indian market and the ever rising stock prices of indian equity which seem to have no ceilings.

In fact, across all markets right now, when you start seeing companies with PE ratios of 40 and above, one should start to get scared. I can never imagine paying for companies with PEs of 40 and above. Standards of valuation just don't justify such high mulitples. But the thing is that people are doing it, loving every moment of it.

Bail out slowly people. Be conservative. Live to fight another day. It is simply a matter of time before the world market corrects. When that happens, be ready for it.

With that i leave you with a quote from Warren Buffet: We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.


Better and better,
Lucas