This is a time to build cash and wait for cheap prices to appear like magic. We’re somewhere in the middle or end of a short-term spike in the market before we enter the summer malaise. This summer promises to be a heavy burden on share prices. Here are a few reasons:
* It’s going to be hot. Denver, in my home state of Colorado, already hit 98 degrees on June 7th, thereby breaking a 130-year-old record. Hot weather leads to lots of air conditioning which uses lots of energy, not exactly a cheap commodity these days.
* It’s going to be dangerous. My friend, Dan Denning, who edits Strategic Investment newsletter, summed it up in a subscriber email sent today:
The Democrats meet in Boston in late July to nominate John Kerry. The Republicans meet in New York in late August to nominate George W. Bush for a second term. Ronald Reagan passed quietly away. And George Tenet finally resigned.
Enough to make the markets nervous? It’s enough to make me nervous. If al Qaeda has plans to affect the American election, or simply to send the entire industrial world into a third, and greatest, oil shock, you’d expect it to happen, and soon.
* It’s going to be expensive. Interest rates will rise. Oil prices will rise.
I’ll be the first to admit that I wish I had bought a few weeks back and could recommend selling something at a nice trading profit. But I didn’t do that and I missed it and if you were following this space for a tip, you missed it too.
We could have bought Sun at $3.75 a month ago and sold it recently for $4.35. That would have been 16% gained in a month. During that same time, Level Three went from $2.85 to $3.85, a gain of 35%. Ah, the clarity and frustration of hindsight.
Let’s not sink too far into depression, however, as these missed blips are served daily and catching bigger trends is what we need to be best at. I’m still far, far from the sale prices I exercised earlier this year and I believe we’ll see better bargains before we see new highs.
The word for now is to keep accumulating cash and waiting for rallies to end and sales to begin. You’ll have some fireworks, a vacation, and two political circuses to help you pass the time.
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