I heard on morning drive radio this morning that Rolling Stones drummer Charlie Watts turned 67 years old today. And worse, Jerry "Beaver" Mathers turned 60. Talk about a kick in the reality! When did all this happen?
Ask yourself the same question about the financial markets. When oil was 80 did you see the trend? When the dollar was at 80, did you see that, albeit very different, trend?
The point is that unless you see relationships changing, one day you turn around and your portfolio is not where you thought it would be. Maybe your were heavy into energy a year ago and now your portfolio - as of last month - was say 50% energy. No wonder it hurt over the past week when oil fell sharply. Looking back, you should have been paring back energy every so often to keep your eggs in the appropriate baskets. Did you really think energy would go straight to the moon?
What is everyone's paradigm now? $200 oil? $800 gold? Dow 13,000?
How about the latest that the tech sector is leading the stock market higher? That was today's Barron's Online topic and the conclusion was that it was last month's place to be. Tech and things from the ground (energy and basic materials) usually do not lead together. They are on opposite ends of the business cycle and there is no denying which one has really been the leader (hint - its not tech).
Don't let the talking heads tell you how now is the time corporations are ramping up their tech buying as we head out of recession. According to many, it has not even started yet (the recession).
The relationship I am watching now is the one where various sector rotate their way around that business cycle. Next up is consumer staples, not tech, and even that may not be a good investment as this bear market rally ends.