Chicken Little, grade C

Markets edge higher. Subject line refers to a 60 minutes segment about a new book about the crash of 1929. The author says that we may see another crash soon. As a long time market participant, the more voices warning about a crash, the less likely it is. Let me add that corrections and even crashes are near inevitable. Timing the crash is a game best left to pundits and authors. It is a low percentage game.

As for the markets, here are some ETFs year to date:

SLV silver 78.5%
GLD gold 60.6%
EEM emerging mkt 29.6%

QQQ Nasdaq 100 18.1%
SPY SP500 13.2%
IWM Russell 2000 10.2%

TLT US20 yr 4.4%

My trading account is +12.0% so I am lagging SPY and QQQ. I am participating on the long side, but have some hedges plus a healthy position in BIL (T-bill etf). Also notable is the run away freight train in precious metals. I have a tiny core position in physical plus a few shares of a gold etf. This is more insurance than investment.

More on the odds of a crash. Chicken Little is always with us. Sometimes the voices are loud and they get TV time and write books. Sometimes they are more in the background, but there are always people calling for a crash. 

Maybe once every 20 years, the market experiences a sharp move down. Young participants have never experienced a secular bear market, that has lower lows and lower highs for a decade or more. The secular bear is also near inevitable, but very difficult to time.

Some very smart educated people have been beating the bear market drum for years. The so-called Buffett indicator, total US Gross Domestic Product (GDP) vs. market cap of the entire US stock market. One flaw in this indicator is that many companies are global. Tech titans, AAPL, AMZN, META, MSFT, NVDA all have global reach. BRKB has held a huge cash position for several years.

On the bull side is the near unlimited growth that robotics and AI may provide. It may be as big an economic change as the railroad boom, or the widespread adoption of electricity. These big inventions led to entire new industries. Of course there is a dark side, there will be losers.

I always say predictions are for entertainment. That said, if I had to predict market top, I’d say it is 2027, and about 50% higher than today. By writing this down, it may remind me to get much more defensive if that scenario unfolds. The nature of markets is that tops form with a near maximum number of buyers, near minimum of sellers. In a theoretical system, market timing is almost a sure loser.

So what to do? Do what I’ve been doing mostly. Overweight mega cap tech with a healthy cash reserve. Perhaps take a few more shots on the speculative long side, looking for a 50% move higher from current levels.