More on highlights

·         Many including myself do not believe a market plunge is coming as of 9/2013. However, we have to be careful with the following analysis. Run the simple chart described in Chapter 50 to spot any indication of a market plunge at least once a month.

o   Among my top-performing screens for the last 3 months, many top-performed screens are from the peak stage (defined by me) than other stages in a market cycle.

o   The typical market cycle is about 4 years. We have about 6 years since 2007.

o   The stock market has not reached the bubble stage yet. It will if it continues to rise at this pace as of 7/2013.

o   The economy has not recovered judging from the unemployment figures.

·         On 6/20/2013, the market lost more than 2% in a day due to the Fed indicating no more easy money. The bond yield jumped. The Fed has been dumping about 1 trillion a year. When the money stops, the market would crash and the 2% loss seems to be a canary. Hopefully the current correction would be less than 10% [Update: only 6% in 6/2013]. Wall Street depends on the government handouts and the government is running out of tools to fix the economy.

I expect the interest rate will rise gradually and it also depends on who will be the new chairman at the Federal Reserve Bank.

·         Some REITs are inversely affected by the rising interest rate.

http://seekingalpha.com/article/1570772-american-capital-mortgage-investment-was-the-baby-thrown-out-with-the-bathwater

·         As of 7/2013, the market still keeps on climbing up despite our poor economy. I wrote:

The problems are:

* About half of the total trades are driven by computers which can change their minds anytime and all at once.

* The higher we climb, the steeper the cliff we will fall from.

Need to take action according to your individual risk tolerance. It is hard to convince the lottery winners not to buy lottery tickets any more. I had a hard time to tell my friends to exit in the beginning of 2000 when they made many times their regular incomes for 'working' 15 minutes a day.

·         After I posted the abstract of the above article, one closed all his long term bond accounts. He acted and had profited (at least so far).

After two or three weeks, my contra ETF to 20-year Treasury surged to 6% (600% annualized at one time) and the market dipped only 6%. It helped me to move a lot of cash back to stocks (Chapter 62). I still bet that interest rate will be higher than today and the market will correct.

·         Will the market go even higher as of 9/2013? We have to compare the risk / reward ratio. If the risk is too high, we may want to take some chips off the table. It all depends on your risk tolerance. No one can predict the short-term market direction consistently.

·         This article is timely and important, and that’s why it is the first chapter of this book. Amazon.com displays the first one or two chapters to promote books.

·         I was accused of selling the secrets of detecting market plunges for less than $10. My reply:

There are 4 general groups of investors:

1.       Institutional investors. They vary in performances. In short, hedge funds as a group do not beat the market in the last 5 years.

2.       Mutual funds. Most cannot do market timing from their own regulations and as a group they do not beat the market after expenses.

3.       Most retail investors are always on the wrong side of the market via fears and greed.

4.       While investors from #1 to #3 are losers, there must be some winners beating the market as a trade is a zero-sum game.

They cannot beat the mutual fund managers who have better resources. The only way to beat the investors in group #1 to #3 is via market timing.

Hope the seeds falling on rich soil would bear fruits and not wasting my time.