Good morning! The American markets hit all-time highs last night, and with the S&P500 now up almost 27% since late Dec 2012, this is all starting to feel a bit crazy. Therefore I'm preparing myself for a sharp correction, which must be due at some point, and the stocks that will be hit hardest will be the over-priced growth/story stocks where price has detached from value.

We've seen with Globo (LON:GBO) how flaky these things are - yes it was subjected to a bear raid from Evil Knievil & others, but it seems that few investors had much conviction in the valuation, as they stampeded for the exit once it began falling, thus doing the job of the shorters for them. Whereas with the relatively safe, solid Value/GARP shares that I focus on, when they fall sharply, investors like me just buy more, as we know our research is correct, and that falls are buying opportunities. So the Bulletin Board maniacs hurling abuse at shorters should be questioning their own skill and actions, as well as the scare tactics of the shorters.

Also, as a long term investor, I am perfectly comfortable with the fact that every now and again my portfolio will take a (say) 10% hit on a market correction. It's not a problem, as my long term portfolio is not geared, indeed has surplus cash on the sidelines, waiting to buy the dips. Small caps can provide fabulous buying opportunities in a market correction - it only takes one clumsy seller, and you can see a small cap down 20-30% for no fundamental reason. If it's a good solid company, at an attractive price, then that's an opportunity, not something to worry about.

I also run a more racy, geared personal portfolio with generally shorter timeframes, and I'm increasingly worried about that, so have bought some insurance with S&P500 Put Options, and am easing back on a few position sizes, to ensure the gearing is not too high. What is too high? Personally I've found that 1.5 to 2 times equity is normally OK (other than in a proper bear market, where no gearing is the only safe option), if it's spread over plenty of different stocks, and they are all safe, solid companies, usually dividend paying & with net cash. Given how frothy the market is now though, I'll…

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