My case for long term Bullishness
Friday Oct 19th, 2007 was a horrible day in the market with huge losses and acceleration into the close. In the face of this I would like to build my case for my long term bullish beliefs. Here goes:
Baby boomers have done a terrible job of saving for their retirements. I heard a statistic the other day that 40% of boomers have $25,000 or less saved for retirement! I can’t even begin to believe that’s true but I do believe it points to the larger problem.
The first boomers recently turned 60 and one boomer has even begun to receive social security. I feel like most of the boomers (and their not so bright financial planners) have greatly underestimated the rising cost of housing, medical care, and fuel. Now in the wane of their careers these folks are beginning to panic.
For the smart one, they will begin to sock away cash into their retirement funds like never before. And what stocks will those funds be chasing? You guessed it, Fortune 500 companies and the occasional speculative trade like biotech.
This force combined with the movement away from overweighting in bonds to more stocks will create a demand curve for those ‘named stocks’ that will push them higher and higher. In the speculative trades I think you will see a return to huge volatility as emotion chases those stocks hoping to recover from their years of not investing and quickly pulling out turning even a minor downturn into a major move.
What to do? I’m going to buy OEX (S&P 100) long calls with lots of time (maybe LEAPS?) and write covered calls against them for income. And in the future be not surprised as these huge numbers of boomers (and all of their voting power) move to have the tax payers pick up the tab for those that didn’t prepare.
Mojo
PS - Please don’t interpret this to mean that I believe the market will take off on Monday. I don’t. At best we will get a little ‘dead cat bounce’ that we will be able to short again.
