(And don’t forget about this week’s Live Q&A at 2pm EST at https://tradingwithcody.com/chat)
I always encourage every investor and trader to write about their activities, mindsets, psychology, and ideas every day and as much as possible. I learned long ago that writing my blogs and my own personal diaries and notes about the markets and my actions therein is key to keeping my mind straight and keeping me from being swept up in the current headlines.
As the Dow Jones Industrial Average sets news highs, it can be instructive to walk back and look at your own analysis. So many of my “professional” money management friends have missed most of the last 4000 points move up on the DJIA. Many of the “smartest” minds on Wall Street have been predicting doom and gloom for the markets and most have been net short for most of the last couple/three years. I don’t think they are nearly as bearish or as short now as they were when I wrote the bit below. And that’s not a bullish data point. Better to buy when the bears and shorts are aggressive.
Most likely economic scenario (Dec. 28, 2010)
What if things go right in this country for the next year or two?
Bull markets are built upon the bricks of skepticism and upon the backs of bears who are short the market and therefore will have to buy at some point to cover and/or chase the rallies. And, as I’ve been pointing out since July’s lows, 25% ago, the bears and shorts have been aggressive in fighting the boom, despite the fact that both the fundamentals and the macroeconomic (i.e., Fed’s relentless liquidity/money pumping) forces seem to point to much higher prices.
It’s not that the economy has been great for everybody. I’ve long agreed that the bailouts and the policies of the Republican/Democrat Regime was going to be horrible for the average Joe and Main Street. But as I wrote many times back in 2009 and 2010, everything from the Republican/Democrat Regime is geared towards boosting big corporate profits. Not to mention blowing bubbles. And that forces all of us to defend our portfolios, including by buying stocks in those same corporations.
Juicing the economy (Nov. 16, 2010)
And I 100% agree that probably won’t help main street or the economy much at all. In fact, as usual, this kind of economic central planning will cause price distortions, confusing market signals and will always end up hurting the economy and the hardest working people in that economy in the long run. But hold your horses. We’re not barely getting started on this latest attempt to juice the economy and asset prices.
And of course, the bulls have had plenty of moments of panic themselves. It’s certainly not been easy to stay long and it’s been even harder to buy the panics and the crashes as the markets have continued their relentless climb higher despite many short-term set backs. Remember these articles?
Flip It: Why the Greek/EU set-up is bullish ( May 16, 2012)
Stay the course (March 22, 2011)
Why you should be buying into this panic RIGHT NOW (May 25, 2010)
Don’t Panic Now That We’re Here at DJIA 6000 (March 5, 2009)
Meanwhile, there’s absolutely nothing anywhere about crises or Euro-debt or bailouts or wealth disparity or real estate prices or Japan’s nuclear reactor melt down or China’s many bubbles about to pop or inflation or stagflation or currency wars or the cost of the many wars the US is actively engaged in and so on. All of these are real issues and any of them might at some point truly roil the economy and the stock markets. But nobody wants to talk about that stuff right now. Everybody wants to know why Apple is down or will Google get to $1000 or how long will the bull market last and will corporate profits really reflect these new highs?
I sure am not a bear yet. I will be again some day, just as I was back in 2007. But I’m sure not as bullish here as the markets play out exactly as we have been positioned for and the world is euphoric about these new highs now that we’re here. I think there’s more upside in the markets, in the corporate economy and in most of the stocks we are currently long. But as I’ve explained many times here before, you want to be aggressively long when the markets are crashed and headlines are in a panic. And that sure isn’t the case right now. So while I know that I’m likely sacrificing some near-term upside by being more cautious now while everybody else is euphoric, I am quite sure that we can continue to outperform big time over the long-term by being patient and cautious while others are being euphoric and greedy. Easy does it for now. In other words, I’m just going to stay underinvested and hedged for now.
And finally, something very real and very positive. And something that no economist can predict, much less predict the effects it will have on the economy. Would Steve Jobs, who died of pancreatic cancer, be alive today if…