It Might Be Time To Become A Bear

This post is by Jeff Carter from Points and Figures

There are signs that the stock market is overvalued.  It’s trading at 32 times earnings where it traditionally trades at 16 times earnings. Companies with no earnings are trading at crazy valuations.  Celebrities are raising capital for SPACs very easily.  The Fed continues its easy money policy.

In this age of politics infecting everything, it is awfully hard to be objective.  I will try.

I wouldn’t be bearish simply because there has been a change in administrations with a 180 degree change in direction.  Biden inherited things that he couldn’t control just like Trump did.  The train on some issues, like what will happen to commercial real estate, was far out of the station and can’t be called back.

I don’t think it’s time to become a mad bear and claw at everything, but you can be a happy selective bear.  There is no harm in thinking about how to hedge, or how to take some risk off the table.   I sold some stock last April after the rally back and diversified it into some other things.  However, I am 58 going on 59 so my risk tolerance is different than when I was 25.  Of course, it’s a fact and twist of life but if I had the wisdom of the 58-year-old at age 25, I would have made some different decisions.

There are certainly places where some asset classes have gotten crowded and it might be time to reign them in.   I was reading about Bitcoin this morning (Read more...)