It is a bull market

I'm travelling now and don't get much time to write. It is just a quick note that the market is running really hot now. The Dow had just reached its historical high over 17000 last week! Wow!!

For those who have followed my blog for long time must know that I'm one of those who have had a lot of doubt about the strength of the market. I have been expecting for a 10-15% correction of the market for quite some time but till now I'm wrong. While there is no doubt that this is not a bull market driven by the fundamentals, I have to admit that this is indeed a BULL market, although without solid foundation as it is primarily driven by the Fed loose money policy. As long as the Fed is willing to keep the zero interest in place and print as much money from the thin air as possible, people are simply having no where to go but into the market for higher returns. This has been translated into higher stock prices. With this in mind, one should always be prepared for a severe correction which could come any time but it is a bad idea to simply sit on your hands at the sideline. There is no way to predict precisely when the correction may come. I have been waiting for it for a few years but it has never come. So my strategy is of two fold:

• I'm heavily putting money into the stocks but largely those which are solid blue-chip stocks that I want to hold for long. I'm especially interested in those which have run into some short-term problems and got sold by weak hands, such as IBM, TGT, APPL, MSFT, Intel etc. For such companies, my goal is long-term dividend reinvestment and as such, I don't care about their price gyration. Actually lower prices of them are great for me in the long run, but believe or not, such companies are usually doing much better than other stocks if there is panic. So you can really sleep well at night with such great stocks in your portfolio. As a complement to this strategy, I'm also actively trading such good stocks for short term income like the one I just talked about for TGT.
• Back in my mind, I'm always waiting for a severe stock market correction. To be better prepared for it, I always have some short positions in place which will benefit me if the market starts to fall. For example, I always keep some VXX open, which will shot high when in panic. I also short some weak stocks which will likely go free fall if everyone runs.  SPG is one I'm shorting. But shorting is not easy and you have to treat it as an insurance policy that you are not really expecting to get back anything but just as protection in a disaster. You also have to be vigilant and are willing to cut loss quick if it is turning against you.