Again as we have posted earlier unless we are truly into an economic boom the valuations on stocks, and notably dividend stocks are too high. This is and has been a FEEL good rally about lots of anticipations and hopes that inflation will stay low, unemployment will be under 7% or less by the end of the year, companies will report nicely better profits, and that huge budget deficits and non paid for additional budget items are not a problem. Sorry but we THINK differently.
People can talk all they want and commentators can issue rosy reports all they want and fools will rush in where angels fear to tread. We have been here before and we have fears that override animal instincts. Sure we may miss the rest of this rally, we may even miss the continuing rally, but prudence and experience tell us to back off a good bit on our bets and wait for a pullback. When markets are rallying on feel good and constant pushing of good news by media the fools will buy and buy.
As we enter another options expiration day and prepare for taking positions next week the positions will allow for additional space between current pricing and what we consider value buying. That means less profit, but it also means less risk of getting slammed when all of a sudden the feel good crowd begins thinking that the economy does have issues.
Smarter and wiser traders and investors have already taken money off the table to conserve capital and unless you believe that Obama and Congress have truly made the world a better place you might want to think before you leap here. Agency reits and a couple of stocks I have mentioned earlier are good places to hide out now.
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