Quote:
Originally Posted by Porsche-O-Phile
You're telling me you didn't see this coming two years ago?
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In early 2006 I expected the US economy to go into a mid-cycle growth slowdown or a full recession (wasn't clear which) with the trough being in 1H07. I thought the stock market would lead the economy by around 3 quarters - putting the trough in the market in mid-2006. So I was short the market in 1H06, then long the market since late 2006.
My expectations have been sort of right but sort of wrong. The economy slowed through 2006 and into 1Q07, with 1Q07 being a growth slowdown rather than a full recession, then picked back up in 2Q07 and it appears 3Q07. Okay, that was as expected. I'm still long the market, though a little short on small-cap stocks.
But it feels - to me - like the economy is slowing again, I mean in a serious way. If that is happening, and the economy rolls over into either a major growth slowdown or a full recession in 2008, then the stock market feels fragile up here at record highs. And indeed the market is acting badly in some ways, despite the highs for the large-cap indicies.
If that is the case, I should go short the market again. That means fighting the Fed. Not something do lightly. But if I was confident enough about a full recession in 2008, I'd be willing to risk it.
Decisions, dilemmas, and doubt.