So many people have come and gone
Their faces fade as the years go by
Yet I still recall as I wander on
As clear as the sun in the summer sky
It’s more than a feeling — Boston
Ever heard the saying, “Don’t confuse a bull market for genius” around here? When stocks are in a bull market — or more specifically, when stocks are in a bubble-blowing-bull market — by definition, most stocks that you could have bought are “going up”. Unless you’re one of the many (former?) money managers who was caught short and/or in cash during this bubble blowing bull fest, you’ve almost certainly got some stocks that are up huge for you.
In my own portfolio, we’ve got Facebook, Google, Apple, Sandisk, First Solar, FutureFuel, Cree and several other names that are up huge for us and hitting yet new all-time highs again today. Should I feel like a genius? Or have I simply done a great job of getting in front of what is now clearly a bubble-blowing bull market? To be sure, as I noted above, I know plenty of professional money managers along with so many retail investors at home who have pretty much completely missed this bull market and the huge gains in so many stocks in this bull market. That doesn’t make those of us who have caught this huge move higher “Geniuses” though.
I’ve long advocated trying to buy the most revolutionary and fastest growing stocks you can find, but doing so in a framework in which we do actually try to game the economic and stock market cycles. You want to buy when the markets have crashed and the economic cycle looks terrible and you want to sell when stocks are up huge and the economic cycle looks great. More specifically for this cycle, I have been saying that we are headed into this ongoing bubble blowing bull market for the past three years.
And most important, the question is — what’s the “smart” thing do now? I work everyday to try to stay on top of when this bubble blowing bull market part of the cycle is going to end, and it could be tomorrow. But I don’t think so. More likely, we will see the top of this stock market bubble when the Fed finally starts trying to fight it. First, you’ll hear the Fed start to worry about their policies potentially inflating some “asset bubbles” (starting to hear some of that lately, aren’t we? So, check). Then we’ll see the Fed actually start to reverse some of the radical QE, 0% loans for TBTF banks, and other bubble-blowing policies they’ve pushed for to create this ongoing stock market bubble. And then, we’ll probably want to really start to panic and get out when the cycle fully turns and the stock market will likely crash once again.
Remember the feeling of fear and how stupid you felt for buying stocks back when the markets weren’t already blowing bubbles bullishly? Do you have a feeling of euphoria and genius right now? The point of all of this is that no matter what happens to the bubbled stocks and bull market tomorrow of next year, you certainly know that the feelings you have right now are telling you something. The hardest trade to make is usually the right one for the very reason that your emotions about your own stock picking prowess or lack thereof is usually wrong.
So the upshot of all this is that I’m going to continue to trim down some of our biggest longs today. I am selling about 1/10th to 1/5th of each of the following stocks:
Facebook, Apple, First Solar, FutureFuel
You’re not a genius and neither am I. And next time you feel like an idiot remember how smart you felt in late 2013. How are you feeling right now? The answer is actually indeed, “More than a feeling”. Hoohah.
