We’ll cover my outlook on each market for mid-August and going forward.
I will give my plan for how I’m now approaching the stock market, but first I need to comment on the supposed stock market bubble. Since April 2009, I have been preaching that the March 6, 2009 major lows in stocks was a generational low and stocks were headed massively higher, but with several very large selloffs along the way. And I have also continually completely disagreed with anyone who has claimed that the stock market is a bubble and is about to crash. For almost 8 years, these people have been completely wrong, and yet they’re still at it and they’ll continue being wrong. But just because stocks are absolutely not a bubble, that does not mean that there can’t be a large selloff.
August is often a quiet time in stock markets as many are on vacation, but it’s also a time to be very aware of important turning points. Over the years there have been numerous major stock market topping processes/DISTRIBUTIONS which have occurred in the July thru September time frame. For example in 1987, the high on August 25th led to a 36% decline into the major low in October. And in 1929, the high on September 3rd led to a 48% decline into the major low in November (although it was not THE final bear market low). I currently have no positions in the general stock market, as I covered the remainder of a bearish TRADING position two weeks ago (for a loss). The complacency currently on display regarding global stock markets is very worrisome. Do you remember the level of fear on display immediately after Brexit? It’s amazing how quickly fear can be assuaged courtesy of a stock market rally. But to be successful as traders/investors we must learn how to/when to reverse our normal human emotions. I used the fear in markets after the Brexit vote to cover part of a short position. Currently the complete lack of fear is making me very concerned about where we’re heading next. So my approach is that I expect to see a short term selloff soon, but that push lower will not be sustained. And that move lower will be then be followed by one more rally, possibly to more new highs, but it’s ONLY into that next rally that I expect to take another shot at shorting the stock market – into strength and at RESISTANCE. But for most people, what you should do is to have plenty of dry powder and to patiently wait for the next big selloff before buying stocks as an INVESTMENT. And to explain the contradiction between my belief that EVENTUALLY stocks are headed much, much higher, yet I absolutely would not currently buy stocks as an INVESTMENT. It’s the same approach that I had, for example, regarding gold during the September 2011 to December 2015 bear market. I believed and still believe that gold was/is going multiples higher, but I ONLY make my purchases when I believe that the RISK is the lowest/the PROBABILITY is the highest. So I buy when and only when I’m “confident” that the final lows are about in place. So as to stocks now, I’m very concerned and the RISK is way too high for current purchases.
My long term positions have not changed much. Those are: big position in PMs, and in this phase of the major bull market I’m most focused on the miners relative to the metal itself.
And gold has its’ eyes set on the September 6, 2011 all time highs of $1922. The road map to that point has 2 big RESISTANCE areas, but which will eventually be overcome. Those areas are —
$1530 and $1795. I have some gold charts which I will explain in detail in an upcoming post. So just continue to focus on buying gold into weakness.
I have a big long position in US Dollars. While over the next few months, I do expect a weak Dollar, I will be using weakness to buy more.
I continue to own US Govt. Bonds, which I bought over 15 years ago when yields were way higher than currently seen. But anyone buying Bonds now as an investment is truly insane. And yes this is the market with the bubble – the global Govt. Bond market is the biggest bubble of all time. The bottoming process in yields began in 2011 and is continuing. Much of the buying of the negative yielding debt in foreign countries is being made by the geniuses themselves at the Central Banks. And if anyone reading this post will please let me know If they have an explanation for the following — why in the world would any individual even consider buying – the oxymoronically named and also the guaranteed loser – bonds with a yield less than zero.
Lastly, I have a position in agriculture via the RJA ETF, which I originally bought in early March, and I just added some to the position. I am wildly bullish on agriculture long term, but I’ll only invest in a basket of agricultural commodities.
And for those who have asked me about real estate, I personally have very little capital allocated to RE, which I paid for with cash several years ago. Long term I am not even remotely bullish on owning RE, however I am very bullish on owning a fixed rate mortgage. Quite a conundrum, wouldn’t you say?
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