It is quite bad that the daily financial news “cheer” (yes, this is the right term) the stock market indicating more all sorts of fundamental and technical metrics, but conveniently omits the elephant in the room: THE PRINTING OF GLOBAL CENTRAL MONEY one of the longest and most dramatic bull markets in history!
Now, at this late date, some very skilled and successful investors have come up with the bold, if not bizarre, advice that investors can feel stupid if they hold cash because the markets will move inexorably higher. This advice evoked feelings of shock, disappointment, worry, and even anger for many of us. Suddenly, the predominant view (for months, if not years) that “there is a higher risk for disadvantage than from above” was reversed for those observers.
What are the possible reasons for this aspect of the market by some?
They really believe what they say! It is shocking, if not frightening, that such skilled observers, on the basis of conflicting evidence, should conclude that the market has more growth potential than risk of disadvantage, especially given how debt has burdened the global economy and how much to be overestimated is the stock market by most measures. Let’s not forget that this is the second longest bull market in history, the second only after a bull market that took place at the dawn of the Internet era, without a doubt the most transformative technology of the last century!
They have been informed by the “powers that be” (you know who you are, even if we never will) that “the solution is inside” and that nothing will be allowed to supply the market in the near future (no matter how long it is). This can annoy many of us, because without knowing the details of these insurances (if any), we are unable to commit significant capital and invest with confidence.
The “current powers” advised them that the only way to prevent the market from collapsing is to get back as much bad money as possible (it’s us!) To support the markets. This is both angry and worrying for obvious reasons.
They are as indifferent as the rest of us to our financial future, but they realize that their business models (read: hedge funds) are based not only on large sums of money borrowed (which the government has provided at low rates). of all times), but also on the leverage offered by the dumb money of cooperation, which allows them to bid prices and sell us to the maximum of all times, leaving us “holding the bag” when the market is occupied. Make no mistake, this is a game with high stakes that will end with us standing when the music stops, that is, when “they” (whoever they are) decide “the party is over”. Without notice and quickly the sale will start in earnest and they will leave the market long before we know what hit us! This is not only disappointing, but rather worrying and annoying!
Investors should feel a little uncomfortable in any of these scenarios. By the way, it is not clear who can benefit from such skill if advice to the contrary. The very rich, who are rightly more concerned with keeping capital than at risking it for higher returns, are not likely to buy this strategy. Retiring baby boomers, who barely have enough savings to live on and who can’t afford to lose their nest eggs at this late stage of their lives, certainly can’t connect to such nonsense. And Millennials who are struggling to earn a salary and are littered with a high student loan and consumer debt are probably unlikely candidates for such a risk-taking. It would seem that only investors in the business of entering and leaving the market at the right time (ie, traders) are potentially able to capitalize on such advice.
Proponents of the “No Cash” strategy say that history suggests that there is a long-term meltdown in books, but these are the same people who have told us that historical values no longer apply and that a “new normal” prevents us from relying on values. old to make predictions. So what makes them so confident that a continuous market is “melting”? The question for investors is: will you feel worse being cash when the market grows or worse being fully invested when the market rises? For many who still clearly remember the collapse of 2008, the lesser of the two evils is obvious.