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Dave’s Investment Blog
Dave’s Investment Blog
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Last quarter I wrote “Over the last hundred years investors that allowed their money to remain in the stock market for at least 5 years had profits over 95% of the time”. We have just experienced a 5 year period of time, 9/30/11-9/30/06, where the S&P 500 was a lower value. This occurs 5% of the time.

It is 95% likely that the S&P 500 at the close of 2011 will be higher than it was at the close of 2006. December 2006 the S&P 500© closed at 1409.84 which is an increase of 24.6% from its value on 9/30/11.

You might question the equity market’s ability to rise 24.6% in a 90 day period. From 3/9/09 through 6/8/09 the market rose 38.5%.

You might say the market was extremely oversold in March of 2009. I would agree. I would suggest the market maybe as oversold as it was in March, 2009.

Short interest is at March 2009 levels. Number of Bullish advisors is at 34.4% and the number of Bearish advisors is at 45.2%, very close to the levels of 2009.Forecasted profit growth is greater than 2009.

All the ingredients for an explosive move to the upside are in place. All that is needed is for the fuse to be lit.

What could light the fuse? Earnings reports for the third quarter; recommendations of the budget deficit panel with consensus support from Congress are passed into law; meaningful, economic stimulus from the Federal Government is passed; and European banks have solid, credible backing from the European Union. All or a combination of these events over the next 90 days will cause significant gains in your investments.

Have courage. Short term pull backs of less than 20% on closing values can and do occur. Long term gains are the norm. To get the gains an investor needs to stay the course for periods of 5 years and more. It’s not timing of the markets, its time in the markets.

Every meaningful Bear Market is preceded by emotional, irrational, highly inflated prices. In 2007, the bubble was the real estate market. Today the only bubbles are gold and long term U.S. government bonds.

Buying low and selling higher is the only way to profit. Buying high and selling low is a recipe for disaster.

Short term movements are difficult to predict. If you know of a person that predicted April 29, 2011 would be an interim high for the S&P 500© and Oct. 3, 2011 would be the low, please send me their contact information. I would like to know when the next interim high and low is going to occur.

My forecasts from last quarter remain:
S&P 500© 12/31/11 1400+
S&P 500© 12/31/12 1500+
2012 continues to look like a positive year for stock investors because the global economy will be in growing.

My long term target for the S&P 500© is over 3626 in the next 10 years or less which is 270% higher than it is now.
Value of the S&P 500© 9/30/1991 376.60