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S&P 500 Racing Away

The S&P 500 Index follows 500 well-capitalized stocks around the world, and the chart above shows its performance over the last three years. I added the white lines and the blue line.

We are in a recession. This isn't a correction anymore, and I decided so around the time represented by the blue line. If it were a correction, the S&P would have bounced off that lower white line and continued along its merry way, between the white lines. It tried, but it failed.

The white lines represent the borders of a "channel" the S&P index has been following for several years, and just as the index was above the channel for a while, I believe it will now be below the channel for a while.

I've been suggesting to friends and family over the past six months that they should sell their broader-based investments (like S&P 500 mutual funds, blue chip portfolios, and so forth), and I hope they've listened.

Some economic pundits were caught saying just last week that the sub-prime crisis is over. However, just this past weekend, J. P. Morgan bailed Bear Stearns out of an almost-inevitable bankruptcy, following the collapse of even more of its sub-prime investments. Ah, Bear Stearns, that well-respected Wall Street powerhouse, profitable every year since its inception in 1923 and with a stock price of $160 a year ago, finally bought by a rival at a scant $2 per share.

It's not over! I wonder who's next?

Comments

Hmmm...I would actually like to have a phone conversation with you about this very topic...if only I weren't traveling constantly for the next six weeks. You say that you have been telling people to sell off their broad-based investments. At what point will you be telling people to get back in? We'll have to talk about this more at length at some other time.

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