When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.”
- Chuck Prince, CEO of Citigroup. July 2007.
Qs 1: An often asked question of many people is that the markets are going up while economy is in shambles. How is that possible?
Answer: Simple. When there are more buyers than sellers, prices go up. Vice versa too.
Qs 2: How high can the markets go?
Answer: By logic, as long as the FED backstops the market, there would be confidence to buy. As long as more retailers continue to join the market. It would go up.
Qs 3: But doesn’t fundamentals matter?
Answer: Benjamin Graham once said the stock market acts like a voting machine in the short run, but it is very much a weighing scale in the long run - eventually the two would meet.
Qs 4: Buy, Sell or Hold?
Answer: If you follow the buy low, sell high strategy. Consider rebalancing your portfolio as the markets go higher. This allows you to capture the gains and protect against losses in any swings. If there’s nothing attractive to buy, there’s really no harm waiting. Nobody will fault you for sitting out.
Quote of the day - You are neither right or wrong because the crowd disagrees with you, you are right because your data is right and your reasoning is right.
After all - We all know what happened a year after Chuck Prince said his statement. History doesn’t repeat itself, but it certainly will rhyme.
