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This Market Is Nuts

Bozo
  |     |   1,375 posts since 2011

OK, I've over-reacted before, but can anyone posit a reasonable explanation for this stock market? It's a melt-up, that much is sure. But why? Momentum? Irrational exuberance (thank you Alan Greenspan)? The FED (aren't they turning QE around)? Interest rates (I thought they were finally rising)? Inflation? Earnings?

As noted, I've decided to harvest some gains. Nothing terribly radical. $40,000 from VTSAX and $20,000 from VTIAX to VBTLX. Another $20,000 from VTSAX to VBIAX.

When no rational explanation on earth can explain why the market is going up, duh, I sell. Two basic axioms: you will never go broke selling too early, and, never let green fade to red.

Those of us here at Ken's blog have often played "whack a mole". Whack stock market profits when we can, then plop the proceeds into laddered CDs. Works like a charm.

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Kaight
  |     |   1,192 posts since 2011
As a retired person, continuation of that retirement has always been paramount for me. I have been retired for over thirty years . . . so far. I very much enjoy being retired. Work is the curse of the leisure class. While not born into that class (far from it), I worked very hard to get there. That's why I have remained aloof from the stock market casino. My focus has always been on remaining retired, not on becoming richer.

All of that said, the current stock market exuberance comes as no shock whatsoever. Commencing on November 9, 2016, in the very early morning, this was all pretty much baked into the cake. It was a shock, and a wonderful one for traditional America . . . and that certainly embraces the stock market. What is more traditionally American than the stock market!! On November ninth the smart money knew the shackles were coming off, so they commenced buying. The buying has not stopped and I see no reason for it to stop any time soon. I really believe that. I just don't believe it sufficiently strongly to risk my retirement on such thinking. That is because I really, really enjoy being retired.
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Bozo
  |     |   1,375 posts since 2011
"My focus has always been on remaining retired, not on becoming richer." I hear you. Funny (but true) story. My wife and I met with a "financial planner" a couple of months back. She worked for a brokerage, and was obviously trying to peddle her wares. She asked us what our goals were (my wife and I are both 70). My wife replied "preservation of capital". The planner then asked, "well, what about growth?" My wife replied, "that's way down the list".

To make a long story short, the planner basically read the handwriting on the wall. We were not exactly in the market for high-ER, high-risk, actively-managed investments. Which would also generate high commissions for her. But, she still comp'd our parking.
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me1004
  |     |   1,381 posts since 2010
As usual, ther are various facotrs feeding it. Probably =the most majorone is the huge tax cut expected, very possibly wihtin the next month and a half. As that gets closer, and continues to proceed toward enactment unfettered, more certainly makes for more money going into stocks.

Of course, other factors also boost stocks, such as Janet Yellen pronouncing that the economy is now recovered, employment solid; and consumer confidence taking a big jump this past month, meaning spending likely about to take off, meaning profits about to jump. Don't forget, the stock market looks at what the situation is expected to be six months from now, now at what it is now.
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Bozo
  |     |   1,375 posts since 2011
me1004, I'm less sanguine than you about tax cuts. All we have at this point are broad concepts. As for interest rates, I'm conflicted. Sure, with major IRA and after-tax CD holdings, I'd love to see interest rates go up. But a rising-rate environment has been historically bad for equities (I think of CDs as a hedge). Mind you, I'm just "taking a little off the top", not bailing entirely on my equity positions.

Going back to tax cuts, don't forget there is still a contingent in the House who might loosely be described as deficit hawks. The concept of borrowing to fund a tax cut for businesses, including pass-throughs, might be a stretch. The idea of wealthy lawyers, physicians, accountants (etc) styling their practices as pass-throughs might be a bridge too far. The Administration has still not explained how it would preclude this loophole.
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Kaight
  |     |   1,192 posts since 2011
Yeah, I also dunno about tax reform. Right now there are large numbers of Republicans (actually RINOs) in both houses of Congress looking to decapitate President Trump. They care even less about the American people. They are internationalists . . . you know . . . America last. They don't want to give Trump anything that might make him look good or actually bolster America.

I wish people would vote in larger numbers in Republican primary elections. Those are what the Republican pukes use to hang onto their high offices so they can screw us Americans over and make goody-goody with their Mexican and Muslim buddies and their beloved and worshipped big-money donors.
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Ally6770
  |     |   4,307 posts since 2010
It is not tax reform when 25% of the people will pay more in taxes.
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Bozo
  |     |   1,375 posts since 2011
Ally6770, I doubt any serious tax policy wonks believe the rubbish currently being peddled about "middle-class" tax cuts. Hint: when a bill makes it out of the Ways and Means Committee (a proposed bill, not a Trumpian concept), we will all then be able to decide who it benefits, and who it does not benefit. My guess (and it's just a guess) is that the bill will never make it out of Committee.

To the extent the Trumpian concepts require borrowing, deficit hawks will hate it. To the extent the concepts benefit the "1%", Democrats will hate it. When AARP crunches the numbers, rest assured AARP will hate it. "K Street" will hate any inroads to their favored deductions, so the lobbyists will hate it. Who's left?
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Bozo
  |     |   1,375 posts since 2011
FWIW, I sold 10 shares of SPY this morning. Any time I turn on CNBC and I see "market at another all-time high", I get real nervous and jerky. I'm getting quite adept at pushing the "sell" button these days. One of these days, somebody is going to yell "fire", and everybody will stream to the exit at once. It is ever so much easier to sneak out before that happens.
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me1004
  |     |   1,381 posts since 2010
Yes, the market does seem to be crazy. And if you thought so from eysterday's highs, today it is soaring.

Consider: A common 10% correction would take it down 2,300+ points!
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Bozo
  |     |   1,375 posts since 2011
me1004, I've been through melt-ups before, and they never end well. About this time of the year, active managers get concerned about lagging "the market", and pile into equities. For want of a better term, it's the momentum trade. I think of the old Western movies, where the bank robbers are trying to race onto a train, in order to rob the loot in the mail car. All goes well until the posse shows up. Well, the posse will eventually show up, and we'll have a correction (if not a bear). That said, once I harvest a gain, it's harvested. Cash is king.

When one is retired, it is ever so much easier to sit on cash. I can abide inflation (I can protect myself therefrom). I cannot abide another repeat of 2008 - 2009. So, little-by-little, I just whack-a-mole.
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Bozo
  |     |   1,375 posts since 2011
me1004, I just keep trying to understand this melt-up. Inflation is what, roughly 2%? Growth, roughly 3%? Dividends, maybe 2%, on average. I just checked my Vanguard account this evening. YTD, up 16.62%, and that after taking profits and re-balancing some into VBTLX and VBIAX. I have a very simple philosophy: Mr. Market keeps setting new all-time highs, I keep selling. As they say, "you never get blamed for taking profits too soon."
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lou
  |     |   1,004 posts since 2010
One other explanation for the exuberance is the massive deregulation of many sectors of the economy. Already, this Administration has cut over 20,000 pages from the Federal Register. Don't underestimate all the EPA, NLRC, FCC, financial and labor-related oppressive rules foisted upon this country by the previous Administration.
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Bozo
  |     |   1,375 posts since 2011
Lou, whatever the reason, Mr. Market is offering us a chance to redeem ourselves for mistakes we made in late 1999 - early 2000 (before the dotcom crash) and 2008. Back then, pushing the sell button was considered foolish. Perhaps it still is. After all, my "nom de plume" is Bozo. As I say to my barber, it is easier to "take a little off the top" while you still have hair.
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Bozo
  |     |   1,375 posts since 2011
Here we go again. Dow up, S+P down, Nasdaq up. Oops, now it's, well, nevermind. Time for a nap.
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Bozo
  |     |   1,375 posts since 2011
I awake from my nap, and "behold" my Schwab account is up over $300, with no effort on my behalf. I proceed to review my positions, and find VTI is a raging bull. I place a market order to sell 10 shares. It fills.

I mean, seriously? Mind you, when I said this market was nuts, I suspect it was an understatement.
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