Interestingly, this was the “Number 1″ searched article in this morning’s (March 8, 2014) edition of MarketWatch.com, followed closely by:
2. ” 7 signs we are near a market top”
3. “How to prepare for the next bear market”
The banner headline was:
“How the S&P 500 gets to 2500 next year”
What struck me the most about the “Most Popular” list, was that a non-financial article was getting the most hits; confirming the notion that Americans love their guns (maybe even more than money). By the way “10 things…” continued to be the number one article the rest of the day.
Also striking were the other two articles, warning investors of the potential for a downturn and telling them how to prepare, continued to trend in the top five. The banner headline, regarding the S&P at 2600 in 2015, never made it to the top five.
This all leads me to believe much of the rhetoric in “7 signs we’re near a market top” may be a bit premature. If we were at a significant bull market top with irrationally exuberant investors, this article would have at least made it to the “Top Five” list. It was nowhere to be seen.
You bet, sooner or later, and it may not be the garden variety five-to-six percenter we’ve become accustomed too. I can guarantee it. I just can’t predict the when and why. It may even morph into a cyclical bear market (with the onset of significantly higher interest rates). Whatever happens it will be scary; likewise it will be normal and to be expected.
Importantly, the continued focus on the bearish outcomes highlighted in the pecking order listed in the MarketWatch “Most Popular” list, would argue against the market being at a secular top right now.
What to do
You do need to make sure that your equity allocation and risk level of those assets will allow you to sleep at night in the event of a worse-case 30% or 40% correction in a cyclical bear market. Why do I use the 30/40% range? In the last secular bull market (1982 to 2000) we had one such very scary drop, 36% in 1987. We had gone up about 168% from the breakout in ’82. The sharp drop in ’87 shaved 56% off the gain. But, at 1739, we still were 65% above the level of the breakout 5 years earlier, and we were on our way to Dow 11497 December 31, 1999.
Interestingly, from its breakout above 1055 in 1982 until it reached 1205 later in that year (up 14%), nobody imagined the Dow would hit the 2722 level a few short years later. Like the breakout in 1982, we are now 16% above the 2007 all-time high on the Dow Jones Industrial Average, and like in 1982, few can imagine a 100% gain from current levels in the next five years,
Air pockets like 1987 are rare, but anything can happen. It is best, however if, you think about that possibility when assessing the risk you can stomach.
This is all consistent with my approach in past posts on kortsessions. So pardon the pun, I’m sticking to my guns, which brings me back to my title, “10 things the gun industry won’t tell you.”
Guns vs. Money
You would think in a financial publication, such as MarketWatch, financial stories (especially negative ones) would trump a negative, slanted story about the firearms industry. Not so my friends, America’s love of the gun, trumps money issues. If only the founding fathers had been more specific in crafting the Second Amendment, maybe to read “the right of the people to keep and bear (flintlock muskets) shall not be abridged.”
What do you think?
P.S. “10 Things…”continued to be the number one “Most Popular” article the next day (March 9,2014), followed by three negative articles cautioning on the stock market’s long run being near an end. Amazing!!!
The information presented in kortsessions.com represents my own opinions and does not contain recommendations for any particular investment or securities. I may, from time to time, mention certain securities for illustrative purpose, names where I personally hold positions. These are not meant to be construed as recommendations to BUY or SELL. All investments and strategies should be undertaken only after careful consideration of suitability based on the risks, tolerance for risk and personal financial situation.