Financial author Stephen Leeb thinks stocks will run out of steam soon.
While GDP growth could reach 6 percent in the third quarter, it’s not sustainable, he writes on Seeking Alpha.
“All the growth we'll see will be the result of unsustainable factors such as inventory accumulation, car production increases (due to the cash for clunkers program) etc.,” he writes.
“With this in mind, you must resist the urge to increase your weighting in stocks. Long-term, we still face substantial headwinds. … Our feeling is, if the market bubble does pop, it will likely be the last pop.”
The bear market rally may run further, Leeb points out.
“It's true that irrational markets can rise, and in doing so attract more irrationality. But in the end there will be some event, some realization, that higher earnings (the ultimate motivator of stock prices) will not show up,” he writes.
And what does Leeb recommend as an alternative?
“There's no asset group more important for you to own on a long-term basis than commodity plays,” he says.
His favorites include Transocean, Nabors, Mosaic, Fluor, Petrobras, and Potash.
Others too say stocks may be overdone.
Discussing the sharp fall in short sales, Michael Cuggino of Pacific Heights Asset Management, told Bloomberg, “I view it as a potentially contrarian indicator in that if you have, on a macro level, more people betting that stocks are going to go up, maybe you should start thinking the other way.”
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