Saturday, June 1, 2013

The end of uptrend in stocks

By looking at S&P500 index I have a hunch that we are at the end of "find the bigger fool" game. All uptrends eventually form a bubble and when the right time comes crash arrives in big steps. If you have read anything about 'Tulip mania" in Holland you should know what I have in mind. It was a crazy boom about tulip bulbs. Everybody seemed to be interested in buying tulip bulbs as a means of investment. Somebody sold his tavern for three tulip bulbs. In the last weeks of the boom the same tulip bulbs would change hands dozen of times per day. Does not look like a sound investment? It wasn't.

As I look at S&P500 chart I see the same tendencies. All time high was broken and everybody started buying like crazy. What is the reason behind such optimism? FED stimulation? Probably! But as they are signaling a possible exit we might see a very sharp collapse that will find S&P500 index much lower than the low of 2008 crash. The bigger the rise, the bigger the crash. That's pure physics. So, do not fight physics. It's too much risky to continue buying stock indexes now. Better concentrate on some other investment instruments.