Thursday, September 24, 2009

Rosenberg: Stocks Are Overvalued And "Tremendously Risky"

David Rosenberg who was rarely interviewed on television when he was the top analyst at Merrill Lynch has more recently established his own firm.

Blodget who was the hype master at Merrill Lynch on extremely risky public offerings and the tech industry, resigned after the late 1990s disaster in the market. He now publishes the Business Insider.

I read the Financial Times column by Rosenberg, but since I could not copy it from the Internet, I found the Business Insider discussed it. Although many are still hyping the market to get people in the market which is now happening among the normal sucker investors who buy mutual funds because they have done the best recently might be in for a rude wake-up call.

No one can predict the market, but Rosenberg gives the good advice that he never buys at the low and never buys at the high. He thinks the market advanced too rapidly and when the 4 percent annual growth does not materialize as the market anticipated, stocks should start dropping. Normally I have observed that there is usually lots of ups and downs before the sharper downturn.

What got me first concerned about the market about a month or so ago is that the short sellers have all given up because they misread the enthusiastic market giving us the clue is that it is very hard to predict the market.

JP Morgan, a marvelous investor said "I never buy at the lows, I never sell at the highs, I play the middle 60 percent." In other words he buys 20 percent off the lows and sells 20% from the highs. Be an investor, not a gambler. I don't follow his strategy, but do rebalance my index funds quarterly invested largely overseas, emerging markets, and commercial real estate. I am of the opinion that no one really can logically predict the market. Insider information, fast computers, and lots of security analysts are something I do not have.

Following an index strategy is not as easy as it looks and I recommend Vanguard World Index Funds where expenses are low and we investors own Vanguard. Read "Enough" by Bogle and Yale's David F. Swensen's book for individual investors, "Unconventional Success ... " which is slightly out of date regarding portfolio of Index Funds design so go to and search Swensen (2 parts) for the video where he recently talked about how to invest, one of the most popular shows where Consuelo Mack, who spent 30 years on Wall Street, was interviewing many of the best investment advisors over decades.

Jim Kawakami, Sept 24, 2009,

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