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I’m out of the market, again.
Last week my portfolio started to malfunction and not to put a fine point on it, I lost way more money in a day than the broad market suggested I should. Over the years this has always preceded a crash for me. I sold everything apart from three special situations and am now 80% cash.
I didn’t write this up at the time because when it comes to crashes you simply can’t be sure you are going to have one and while it’s cheap to sell these days and re-enter at leisure I don’t like to imagine I’m always going to be right. After a week I’m very comfortable being in cash and sitting watching what happens next.
As far as I can see the market is broken in the U.S. and U.K. US valuations are way too high, even without the economic fiasco underway, and the U.K.’s market structure appears at best to be broken in many places. I’m not going to play ball in a mine field.
I think we have begun the next installment of the Covid crash and we will get it in the lead up to the U.S. presidential election. If we do not then we will get it soon after. If it’s February and we haven’t crashed I might clamber out of my bunker but even then maybe not.
I really do not want to be in cash because I do think inflation will get traction soon enough, but this correction/crash will come fast and hard and I don’t want to get crushed under it.
The S&P 500 chart is enough for me to want out: CREDIT: ADVFN
The Fed or the U.S. government can levitate the market out of any fresh crash, but I do not see that as a certainty before the election, which I believe will see, barring another election turn up, a Biden victory.
Trump has been the champion of the stock market for sure and his defeat could be enough in its own right to crash the market. However, that is absolutely not necessary, the market is already on its way to a plunge as I see it.
The markets are high because of bailouts, and those bailouts are in the short term coming to an end. Economic gravity will have its way.
So let’s look at the U.K. stock market: CREDIT: ADVFN
This is a deeply wounded economy and the situation is only getting worse.
It will be lucky if the coming bottom is not far below the first. What exactly is happening to push the index up to previous highs when the reality of the situation is so bad no one cares to sketch the situation’s nadir that is far in the future, even without factoring in Brexit?
You don’t have to be a master chartist to draw these lines: CREDIT: ADVFN
Or for that matter this one: CREDIT: ADVFN
To me this comes from a U.S. crash, which will crush all markets and all instruments and I for one am trying very hard not to be under the window when that particular grand piano falls from it.
I sincerely hope to be proved wrong, but I prefer to hope with my capital safely in cash.
Smart asset allocation can wait until after.