Investors Take Profit After Rebound

After a strong rebound in the previous week, market encounters selling pressure as market participants take profit on earlier bargain buys. Smart investors seem to have learned the trick to buy low and sell high in a range bounded market. Market manipulators remain skeptical on market outlook as household investors are extremely cautious on equities and only allocate small portion of the portfolio in stocks. But as individual investors are no longer dumping stocks, short selling from market manipulators would not drive the herd into panic selling.

Traders have plenty of unfavorable news to drag down market. However, stock holders are not willing to sell at beaten down price. Therefore although market wavers on news, trading activity remains low. Smart traders find opportunity in swing trading while investors remain sitting on existing portfolio with limited stock exposure and large amount of cash without significant buying or selling.

Market manipulators are using news to weight down market for the bearish positions. But making profit is not as easy as in last year because market participants have paid heavy cost to learn the trick and will not make similar mistake again by staying on the sideline. However, speculators can use this opportunity to make profit in market cycles. When market drops to bottom, buy at a bargain with cash while other market participants are fear of market collapse. When market rallies, take profit and use the cash to wait for another buying opportunity while traders and market manipulators start selling.



The Big Conundrum: Stocks or Bonds?
As the sovereign debt debacle in Europe slogs along, and with the global economic recovery seemingly stalled out, investors and analysts are sizing up a drastically reshaped global landscape.

In this increasingly volatile market, some see stocks as having much better prospects than bonds, assuming Europe rights itself and the economic recovery finally takes off. Others believe the three-decade bull market for bonds still has legs.

A lot may depend on your inflation outlook - but bonds, particularly Treasurys, have performed so well for so long, it's hard to think fixed income is the horse to ride. At the same time, stocks have been full of disappointment lately, and investors are much more risk-conscious today.

Indeed, investors today remain confused because although stocks look attractively valued for the long term, their emotions are whipsawed by almost daily fluctuations in the global equity markets and constant reminders that another Lehman-like catastrophe could be brewing in Europe. At the same time, they are being advised by bond experts that Treasury bonds are likely the next bubble.

"Stocks are very cheap," adds Charles Rotblut, editor of the AAII (American Association of Individual Investors) Journal. "But we are facing a situation where things could go right or they could go wrong. So, while stocks look very attractive over the long-term, there are issues that could hurt their short-term returns."

At the same time he warns investors to be judicious because except for Treasury bonds, most other fixed-income assets have been moving in tandem with the equity markets, diminishing their diversification benefits.

Net Worth Implosion: It's Not Just Housing
New Census Bureau data shows that median household net worth, excluding home equity, fell by 25% between 2005 and 2010. That decline was driven largely by the plummeting stock market, which devastated Americans' portfolios and retirement accounts.

"One of the significant factors is housing, of course, but it's not that alone" said Alfred Gottschalck, an economist with the Census Bureau. "It's how business conditions affect stock and retirement accounts."

Forget Summer Swoon, This Is A Buying Opportunity: Wilkinson
With the price of safety, as measured by demand for the 10-year Treasury, trading near an all time high, it is fair to say that the price of risk, as measured by the S&P 500, is comparably cheap right now. Put another way, to some investors, there's nothing but downside for debt and nothing but upside for stocks.

To be fair, this is not to say that markets won't continue to be risky, volatile and frustrating, but rather, that over time, look set to deliver superior returns especially if you believe they'll be guided by the Fed.

US Stocks Cheap? 'You're Wrong': Grantham
Considered one of the finest investors of his generation, GMO co-founder Jeremy Grantham is known best for his bearish views on U.S. equities. At the Morningstar Investment Conference on Friday, he's upholding that reputation. Outside of the U.S., however, his views are much more bullish.

"Equities are boring; bonds are disgusting," said Grantham. "It's a difficult environment to operate in."

Grantham thinks US corporate earnings are "abnormally high," for two main reasons: He sees profit margins trending up as government debt increases - "this is an artificial prop to the market" - and an overly bullish bias because being bearish is "bad for business."

In particular, Grantham cites energy, metals and food - limited resources sure to be stretched by China's rapidly growing demand - as opportunities for the internationally minded investor.

"We live on a finite planet," he said. "We have finite resources, and we're running out of good arable land."