1. there is much excitement and exurberance and the feeling of 'things are going well, earnings are great' so there is the expectation that earnings will continue to grow and therefore stock prices will continue to grow
2. the 'bigger fool' theory is starting to come into play. the theory being that even if a current price is NOT worth it, you are willing to pay for it due to believing that at some future point there will be an even bigger fool who is willing to pay even more. that was very prevalent in tech bubble with PE's of 100's. There are a few stocks now though where I believe the price is becoming too expensive. one that comes to mind is NCM, another is ORI ... basically any stock with a PE of 20 and above I'd put in that category. they are becoming more expensive so unless they are forecasting absolutely stellar returns in the next 12 months ... where is the value?
3. there are sectors of the market which believe the boom will continue, economies will roll on in the boom, asia will provide good demand and the USA will not go into a recession and when interest rates are decreased things will take off again. I DO NOT subscribe to that view. most economies around the world are becoming just a bit too hot and particularly in the USA and aust interest rates are starting to take their toll. i noticed in aust recently our repossession rate has climbed significantly - a sign of too much debt and unaffordable interest rates.
4. momentum - markets are going up .. people are buying and they just keep buying. what happens when the music stops, well, those holding the shares lose and sell at whatever price is available.
i got rid of my last long position today, am on the sidelines right now. i don't dare be holding longs when the market falls, however i've been burnt getting into shorts too early so i'm on the sidelines just now, will leave it till last possible time to enter shorts and ride it down. am expecting the ASX to bottom around last yrs high before the correction (i.e. a 1000 point drop). no idea where USA will go but I suspect it'll lose over 1000 might bottom around 11500 or somewhere around there.
there are just my opinions of course, i may be very well wrong, but i suspect comments made by sandune in an earlier post will prove to be very accurate
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