I can’t believe I’m only 50% in cash when I still expect the market to take a big dive at any moment.
As a long term Bull I just can’t sit on my hoofs and wait forever. The theoretical rule book says you shouldn’t bother timing the market, but I can’t help it. The market is very high and I get vertigo just looking at valuations even if they aren’t in bubble territory.
I like cheap stocks and there just aren’t that many around anymore and what is worse, cheap companies are simply lying dormant or getting cheaper.
I put this down to hedgers buying winners and selling losers, which makes for a kind of vicious circle for cheap stocks. One day that situation will reverse but currently there is no sign of it.
Special situations are working out well, but little else is much fun.
When I say fun I mean profitable. The equity markets are going nowhere, the market has been in a sideways channel all year. When the US markets do fall, they get suddenly yanked up like a pair of wannabe rappers jeans.
I always maintain that there is really only one thing you need to call when it comes to investing in the market and that is, “is it going to go up or down?”
If the market is not going up then pickings are going to be slim.
Even a super long term investor like Warren Buffett makes the fundamental call that the market is going up over the long term.
A bull market makes everyone look good, while it is terrifically hard to make profits in a tumbling market, unless you are in the select group of traders that can prosper on the short tack.
So lets look into the future and make that call.
Is the market going up or down.
As I have been a bear for two miserable years I am starting with the bear chart.
It looks so likely I want to sell just from looking at it. You have to have a lot of faith not to see that a big fall is about to unfold. The global economy is definitely dipping, if only a little. The end of US QE has put a chill in the air and it is for all to see over the last year the market has been going nowhere. The S&P 500 seems suspended like a ball at the top of its arc. Then the previous crashes look so similar, the chart seems to be sending a clear warning of bad times ahead.
We’re all dooooooomed!!
But wait what about a bull run. So here we are, the bullish future.
The good thing is, we have plenty of channel to measure a breakout. For all the troubles, the market can rest then surge ahead. Clearly the developing markets are suffering, perhaps it is the west time to boom. Low oil can only be good. Cheap commodities and cheap energy is just the kind of benign environment to add a sudden boost to the developed economies. If we look at the 70s and even 80s on these charts, we can see that a high market can go way higher. High indices are just a function of progress. We should not only get used to it we should enjoy it!
Don’t worry be happy.
On balance we have a fair amount of room to maneuver.
We have also plenty of headroom and for that matter room to fall so that if either of these trends kick off we can clearly follow them and then anticipate a directional move for a long time.
The good thing about looking at the long term chart covering decades is you can see that the market does trend and if you kick back and take in the big picture in it seems clear that there is no need to panic.
Which way do I think it will go in 2016?
I think the market has to correct.
However I’ve been wrong about that for a long time. So my solution is to be in the market a fair bit, but less than usual, buy special situations, buy the dips and keep very aware of something nasty coming out of China.
Without doubt the central banks are performing a delicate balancing act and doing a solid job keeping the markets up. One slip though could send the whole system into freefall. That’s the horrible predicament investors find themselves in and that fragility is not going to change for a long time.
“The market will be unchanged” is the statistically correct answer for the performance of 2006, so if I was going to be sneaky that is what I would pick. I don’t think 2016 will be another 2015. Something is going to give.