Much Ado About Nothing

After a two day decline following the Brexit scare the market has gone up and up from a previous high of 2129 on the S&P 500 to an all time high of 2165 for a total gain of….1.6909%. My forecast at that time was a possible 5% rise versus a possible 25% decline (see Hope for the Best posting).  The gain so far from the day before Brexit is 2.46%.  I’ll stick with that forecast.

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The Logic Behind Buying Stocks Now

The Wall Street Journal today offers a clue as to why one should jump into the stock market now.

WSJ Wednesday,July 13, 2016 

In a flurry of other European debt sales, countries from Portugal to the U.K. were able to raise cheap finance on Wednesday, despite concerns about their economies and the global uncertainty spurred by Britain’s vote to leave the European Union

So if you are so worried about the global economies that you would buy German 10 year bonds with a negative interest rate…then buy stocks of corporations???  No thanks!  I think I will just sit here counting my cash.

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Money Can Buy Happiness

The vast amount of money central banks pumped into the financial markets since the crash of 2008 brought happiness to anyone invested in the market…until 2016.  2007 also saw people getting rich in real estate and the stock market.  What was different between these two periods was the lack of economic growth since 2009.  This has been the most tepid economic recovery since the Eisenhower presidency.  A financial boom but not an economic boom.  2007 saw 3 peaks before a slow two year nose dive.  The last 6 months has seen 3 peaks.

Deja Vous II

The ETF that is way above the S&P 500 (blue fill) has a lot of the companies that Joshua Ramo touts in “Seventh Sense.”  Maybe he is right about the long term outlook.  But I wouldn’t touch them now.

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What’s Next?

EU

Anybody who thinks there is no problem,,,is part of the problem.  The old EU structure is in dire need of repairs, i.e.,recognizing the social, political and monetary problems and SOLVING them.  I would not give that anymore than a 25% chance.  Therefore,  I’m waiting for the next shoe to fall which could end with a much smaller and manageable EU.  When the dust clears there will be a great opportunity to invest, not speculate, in the companies identified in “Seventh Sense.”

I would very much like to know if anyone acted on my call to raise cash this last month? I have the feeling I am a voice crying in the wilderness.

 

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Hope for the best; prepare for the worst

Yellen says the long term outlook for the economy is grim, interest rates will remain low and the WSJ says Europe will tank if Britain exits and doesn’t look good if it stays.  So, why is the S&P 500 up 7 points when it is within a whisker of its all time high?

  1. The market doesn’t always make sense
  2. The market is dominated by high speed traders and robots, not investors

When the best case scenario is a 5% gain and the worst case is a 25% loss…cash looks good to me.

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Cash is an Asset

With negative interest rates and the stock market at its all time high many are saying stocks are still the only game in town.  Here is my choice on the left.  The Schwab choice is on the right.

PRI AA 5-31-16

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A New Age is Here

According to Joshua Ramo, the good news is: we have entered the age of networks that instantly link databases, platforms and AI meshes so that everyone and everything is connected at faster and faster speeds. This will lead to breakthroughs in medicine, science, and engineering and yes, finance.  The bad news is: “an instantly linked world means that rapid apprehension of the nature of any danger is essential.  Time is the one thing we have ever less of in our crisis filled world.” He has a lot more to say that is worth reading and I recommend, “Seventh Sense” to you.

I think he is right about time. It used to be that a wait and see attitude was wise when it came to investment decisions, for example, let’s wait and see whether the UK exits the EU, and if it exists, let’s wait and see what the reaction is.  I plan to take action before I wait and see.  There are times when cash is king.  Therefore, an emergency landing is called for.

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