I had the pleasure last night of spending an evening with my favorite economist, the big- brained Dr. Dennis O’Donnell. Regular readers of this blog know Dennis for two reasons. Perhaps most importantly, he very accurately predicted that the stock market would bottom out at about 6500, a full two months before it occurred. And secondly, he has exquisite taste in Irish whiskey.
So of course I decided to take advantage of both talents, and while sipping his booze, I asked his opinion on the next moves for the market. Unfortunately he was not upbeat. Dennis feels that the market could linger in its current range for awhile, perhaps even rise to the 10,000 mark, but ultimately we should expect it to fall again, this time to about 7500. There is just no compelling development or earnings to justify a more optimistic position.
Dennis is more upbeat about China. He explained that the Chinese economy has grown to the point that they can now service their own untapped market, end essentially shift their diminishing export capacity to instead sell to their now more affluent Chinese population. This all makes sense to me, and I’ve personally been shifting money into China over the last few months. I’ve had good luck with the Mathews China Fund (MCHFX).
Once again my caveat where investments are concerned. The market is illogical, often insane, partially controlled by Charlatans and outright crooks, and anyone who says they can accurately predict it is a lying Weasel. Don’t blame me or Dr. O’Donnell if you sell out your portfolio and the market goes to 13,000, or the Chinese market implodes due to tainted cat food and computer viruses. Caution, patience, diversification, and common sense all make for a solid portfolio.