Friday, September 24, 2010

Market Commentary

The market has now broken above Resistance and likely to carry through from here.  Today the DJIA is up close to 200 points in the first hour of trading, so it looks like the October pullback isn't happening.  Apparently it already happened back in the summer, so I'm putting all my money into stocks right now.

It is also time to have little or no money in long-term bonds.  The reason for that is that since the value of bonds goes down when interest rates go up, anyone who holds bonds down here at miserably low rates will lose money on the value of the bond as rates climb.  Why would anyone pay you $1000 for your $1000 10-year Note at 0.3 percent when they can get 0.5 percent for the same price?  Buyers will still buy your bond.... but for less money.  The Fed will be raising rates in the coming months (it certainly can't lower them much -- they are almost at zero now) and that makes losses in long-term bonds inevitable.