Summary for Week Ending 19th May 2007
Nothing new to report since last week. The market has continued as expected and there is still nothing on the horizon to indicate anything different will happen. Still looking at the 12th July as a likely top but I'm not all that confident in that. When the market gets up a head of steam like it has now, it takes a lot to stop it. basically, you need money to run out!
When a market is in a strong bull phase, as it is now, there is a need for Capital and lots of it. For every sale that generates a return for the seller, there is a requirement for capital to go back into the system. This process eventually becomes a death spiral as more and more capital is required to keep the engines turning at the same pace. This process is also known as the bigger fool theory. This is where Capital is chasing ever higher returns, purchasing at ever higher prices in the belief/hope that a bigger fool can be found to take the asset at an even higher price. A symptom of wild bull markets is a disregard of asset pricing models as they momentarily stop working and this does make sense when everyone is looking at profits that appear without explanation. There is nothing wrong in participating in these asset blowout events, just so long as your not the last fool in the line.
The old chestnut says that the last in the market are always the professional, these being Doctors and Lawyers. This is essentially true, but another warning sign may be when your hairdresser starts giving you stock tips. If this happens ... get out quick and wait. You will see that price again .. on the way down.
Until then...... more of the same.
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