I just heard yet another pundit say Dow 18,000. I looked at the rise of the NASDAQ Index moving towards its prior 2000 high and it was, as they say, “déjà vu all over again. The last few months the ever increasing currency supply has singlehandedly pushed the market higher. There has been no reason to buy the market be it not the fact that there is no place else to go with your money. Foreign markets are pushed higher with inflated money supplies and rates kept artificially lower with all of the available capital. The one direction bulls are back and the memory of the 2000 and 2008 crashes are gone.
My call a couple of month ago that we were at or near a high was as premature. I did the same thing in 1999. I sat out most of the year and left some serious money on the table. I could be early again or just plain wrong but I still see three big reasons to back off equities and start taking money off the table.
1. Earnings are just ok. 20x is no bargain and most of the stocks with any dividend yield are at least that high. Tech stocks are as they were in 1999 trading on hope, hype and inflated cash. I believe the indexes are overpriced however there are still a few individual companies worth owning and holding selectively.
2. Large sums of money have been made over the last ten years employing the strategy of getting ahead of the Chinese in whatever they are buying. They are now running on fumes and growth has, and will continue to slow.
3. I never tried to trade on wars, conflicts or political craziness but it has reached a point with so many flashpoints that we are one stupid act away from a big-time explosion. The leadership vacuum has allowed many situations to get out of hand and there is no easy way to solve multiple problems that could ignite a major economic meltdown. Pick your poison here, Russia/Ukraine, Israeli/ Palestine, Korea, China, Syria and now we are so desperate for help we have turned to Iran. Holy Ayatollah Batman there is trouble in Gotham City let’s see if the nice Mullahs will help.
BOOM BAM
With mounting debt, increasing money supply and international ciaos even the open check book of the Fed can only monetize debt and oversupply us with investable cash so long before the implosion happens. Don’t know when but I do know it will be ok, and then it won’t.
Hope you have some winners in your portfolio and cash on the sideline when it happens.
Happy investing.