Buying small caps? Take cover
As Wall Street's big guns come back from summer holidays, risk rises for the little guys.
Investors are anxiously watching what the European Central Bank will do to address the region's debt crisis. Last week they were on the edge of their seats when Federal Reserve Chairman Ben Bernanke spoke at Jackson Hole, Wyo.
The uncertainty hasn't deterred small buyers who have been in the market recently. Unfortunately, I think they are setting themselves up for a major fall. During the last few days of summer, usually extending through the Labor Day week, smaller investors run the show. They are almost always net buyers, and they love small-cap stocks. Take a look at the iShares Russell 2000 Index (IWM) to see just how pronounced this is.
But with the market leaders returning from vacation, things will soon look completely different. Small investors pinning their hopes on Bernanke will likely be very disappointed.
What we do when the market declines defines us as investors, and the market is poised to decline. Regardless of whether Apple (AAPL) launches a new iPhone or President Barack Obama gets elected to a second term or QE3 turns out to be a pipe dream, our responsibilities do not change. We need to protect ourselves, but we should not miss opportunities either.
There are investment strategies that offer protection on the downside and an opportunity to profit even if the market does rise. There is no better time to adopt them than right now, when we are in a clear transition period. The baton will soon be handed to the market leaders, and they have a very different perspective than the little guy.
if you actually read the article, the author seeks to warn and protect the smaller investor, and advise them of both the likely market direction and urge them to educate themselves on how to profit there from. apparently he is simply casting pearls and his words have fallen upon deaf ears? i.e if the market goes down 20% and you don't make 40% as a small investor, then where does the blame lie?
during the summer months ("sell in may and go away") these "market leaders" he discusses spend their time at their beachhomes, and stay away from daily trading. after labor day they return either loaded for bear, or looking to cook some bull steak on the barbie. they care not who is impaled in that process.
put your helmet on, buckle the chinstrap, and go watch the scouting films .... if you can't beat 'em, it is best to join 'em .....
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Serious issues like drought and the deterioration of the developed world spell opportunity for this industry leader.
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