The following is an excerpt from Richard Russell's Dow Theory Letters
Below we see the signs of a stock market that must be graded bullish. Here we see that the percentage of NYSE stocks that are trading above their long-term or 200-day moving averages. The current percentage is a bullish 79.47%. True, back in February the percentage was even higher at 83.28 %. Utter perfection would, of course, be 100%. But there is one problem with 100%. It can't get any better than 100% -- and if it can't get any better, then it can only get worse. So I'll take 79.437% with pleasure.
So the current 79.47% is a very encouraging percentage area to be in. It allows for the percentage to rise towards 100%, and at the same time it is currently far above the critical 50% level.
Successful fund managers have learned to avoid greed. They know that pigs usually don't make money. In the lead editorial in this week's Barron's, editor Randall Forsythe quotes Leon Black CEO of Apollo Global Management as saying, "we are harvesting." This private equity giant is now selling some of its equities. They have done their "planting" during the difficult early years of the rise and now they are "harvesting" some of the fruits of their plantings. Black is cashing in some of his profits because he thinks things are so good that they can't get much better.
One of his observations is that there has almost never been a better time to borrow. The Bernanke Fed has pushed rates diamonds down so far that borrowing is almost at give-away levels. The yield on the benchmark 10 year Treasury is down to 1.63%, a figure that would have been thought impossible twenty years ago.
So while most investors are bubbling with gleeful bullishness, many old timers are worried because they think we're in the period where financing and economies in general can't get much better.
Let's take a look at our old friend, Gdow. This includes 150 of the biggest international blue chips in the world. Here too we see signs of bullish success as Gdow, the "international Dow", breaks out to new highs.
So the writing is on the wall. Business and the world economy can't get much better. And the question -- what do we do about it? Ah, here's the hard part. Do we stay conservative and philosophical -- and do some "harvesting" of our own -- sell down to the sleeping point? Or do we smile in the face of risk, and sit tight with our growing profits? Me, I prefer to harvest, but the truth is that I've been too early many times before.
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