The stock market has turned into the real estate market, where everyone is afraid to sell for fear of being unable to find a replacement. Will it next turn into the Bitcoin market, which has gone ballistic?
Risk assets everywhere are now facing a good news glut.
My 2020 market top target of 30,000 for the Dow Average has come and gone.
This year’s price action really gives you the feeling of an approaching short term blow off-market top. If Covid-19 crashed the market, will the vaccine kill the recovery?
A few years ago, I went to a charity fundraiser at San Francisco’s priciest jewelry store, Shreve & Co., where the well-heeled men bid for dates with the local high society beauties, dripping in diamonds and Channel No. 5.
Amply fueled with Dom Perignon champagne, I jumped into a spirited bidding war over one of the Bay Area’s premier hotties, who shall remain nameless. Suffice to say, she is now married to a well-known tech titan and has a local sports stadium named after her.
Obviously, I didn’t work hard enough.
The bids soared to $27,000, $28,000, $29,000.
After all, it was for a good cause. But when it hit $30,000, I suddenly developed a severe case of lockjaw. Later, the sheepish winner with a rampant case of buyer’s remorse came to me and offered his date back to me for $24,000. I said, “no thanks.” $23,000, $22,000, $21,000?
I passed.
The altitude of the stock market right now reminds me of that evening.
If you rode the S&P 500 (SPX) from 700 to 3,700 and the Dow Average (INDU) from 7,000 to 30,000, why sweat trying to eke out a few more basis points, especially when the risk/reward ratio sucks so badly, as it does now?
And if there was ever an excuse to take a break, it is my blistering 2020 12,000-point rally off the March bottom.
I realize that many of you are not hedge fund managers and that running a prop desk, mutual fund, 401k, pension fund, or day trading account has its own demands.
But let me quote what my favorite Chinese general, Deng Xiaoping, once told me in person: “There is a time to fish, and a time to hang your nets out to dry. You don’t have to chase every trade.
At least then, I’ll have plenty of dry powder for when the window of opportunity reopens for business. So, while I’m mending my nets, I’ll be building new lists of trades for you to strap on when the sun, moon, and stars align once again.
