I know it's been a while and probably nobody follows this blog anymore. I've been busy with a lot of stuff and found it hard to find the time to make posts and so this post is long overdue. My last post about 10 months ago suggested that you give the bull market the benefit of the doubt for the reasons I've been mentioning here since day 1 which is this: Prior bull markets have ended when most have fully embraced it (i.e. greed/complacency) and when monetary conditions are tight (i..e inverted yield curve). It really has been that simple! They don't end when a certain valuation metric is reached or after a certain number of years as the pundits who have been crying wolf would like you to believe. So, given our definition of what the end looks like can you truly say that people have embraced this bull market? Sure, it's a subjective thing to qualify but I still don't see it. Ask the average guy on the street what he/she feels about the markets or the economy. I bet you will get a response that would range from cautious to luke warm at best and it's been this way for years! And what about monetary conditions? Yes, they are tightening but only starting to tighten from extremely accommodating levels - interest rates are in the process normalizing from all time record lows but they are still quite low and the yield curve is positively sloped. This all suggests the bull market is still in tact.
I will be one to admit that valuations are not attractive and for this reason it's keeping people on edge, that along with Trump being at the helm of the USA, but I remember in 1999 when valuations were also high, people were rationalizing them saying it was the result of a new era (the internet) and so traditional valuation metrics didn't apply. It's that kind of complacency that makes the market vulnerable and we are not seeing that now. So long as people are on edge, there is a wall of worry for the market to climb! This is not to say that you won''t get nasty drops - you can, and we've seen them happen throughout the recent years, but you must continue to give the bull market the benefit of the doubt when they happen if prior to the drop you did't see greed and tight money. Maybe we are going to get one now with this latest standoff between the US and North Korea. This looks like yet another poor excuse for the market to go down.if you ask me and I doubt this correction will go really deep...it could very well be over already (tough to say). North Korea will do fuck all like it always does...they are like my neighbor's barking dog. Trump may very well be brash and a bully but he's obviously right in that North Korea is totally over matched and would be crushed if they dared to make any type of attack.
So in conclusion I will say that when the markets are "high" it does make it susceptible to corrections and frustrating to find good set ups on the long side but you must to continue to give the bulls the benefit of the doubt until we see greed and tight money. Don't go short and don't get shaken out easily. Keep some cash on hand if that what it takes to make you a strong holder, hedging a bit is Ok too but don't go net short. There hasn't been a shortage of articles and pundits who have been warning since 2015 about the "aging bull market" and what has the market done? Gone higher and higher and that's not surprising to me given the motto of this blog.
