My 1st Million At 33 – yes, you can do it too

Similar to US Dollar fall, after the Thanksgiving Black Friday, stock market took a big fall yesterday. Yes, market was quite overbought. In fact, I hope it corrects for a week or two, so that I can add some more stake. I am still in the bullish camp for the general stock market heading higher towards next spring in 2007.

Part of the reason is that it seems that real estate market next year probably will not fall as much, possibly by just 5% at where I live (metropolitan cities in California). Looks like the lending standards have not tightened much, and therefore all those exotic loans will keep rolling over and stay exotic. In other words, the clocks on these time-bombs have been delayed and spread out through more years into the future. They will “explode” and foreclose only until that the loan balance have increased sufficiently or flipper’s cashflow has drained up due to lack of sufficient rent income to cover mortgage payment AND housing price has fallen sufficiently to disable the rollover process of the exotic loans. According to LA times, 26% of the loans are interest-only, and 13% of the loans are ARMs in the first six months. As long as mortgage market does not implode, the current real estate market will only be constrained by the turn in investor psychology and household income (which certainly limits any further dramatic run-up in the real estate market).

Looking at the poll results from thestreet.com, I’m actually cautious of precious metal sector at this point, which was voted by 23% of the bulls to be the most likely sector to rise. Spot gold has not exceeded my line of sand at $650 for me to turn fully bullish. While I’m still neutral to slight bullish in precious metals, I’m very encouraged by the actions in both the silver and silver stocks which have been outperforming the gold stocks. In a precious metal bull market, I would like to continually see silver outperforming gold. At the top, silver to gold ratio should definitely hit a high point without doubt according to the past history. In fact, I simply regret not converting more of my gold mining stocks into silver. Notice that in the following figure (click to zoom in), the top usually correspond to the top of the precious metal market.

There will be a stock market correction of probably more than 25% almost for sure I believe. But I am still holding my breath, believing that the yesterday’s fall is not the beginning of the end of the bull run. Just remember not to be too greedy and try to sell out at the very top early next year. Very few investors percentage-wise will be able to do that statistically speaking.