I wrote a post on my personal blog this morning talking about how I had no idea what was coming next in the markets. I said things like “stocks haven’t fallen enough to be a screaming bargain and if world GDP slowed down another 2-3%, they would probably be considered expensive” and ” government bonds are trading very strongly, though today they are resting too – who wants to be long such a low-yielding asset? And who wants to short US bonds when Europe could collapse at any moment?”
It is truly the unknown – it’s also one of those times after a 3-4 month rally where stocks are in limbo, so charting is tough, though some shorts have worked. I could make a case for going short and a case for going long in various investing themes. Instead, I made the case for earning some income, and making smaller bets if you need to. Because right now, there are few screaming buys and they could all be washed up in a European market bomb.
For the next month or maybe two, we will all have to relax. Just see what opportunities come to us. I have used the time for market research and testing investment ideas in a personal account. But I am certainly not getting on TV and making any bold proclamations (someone else can, and has done that).
Perhaps if you are feeling worried, take some of your investment risk off the table. Perhaps ratchet down the risk level of what you own to something more comfortable. Novice traders should be in mostly cash, as a lot of pros are. The need to do something is an emotion we must control – perhaps putting on a small trade is ok, but if you’re getting hyper, try going for a run!
Interesting note: Josh Brown who authors the wildly popular blog The Reformed Broker wrote a post along these same lines today. I was pleasantly surprised when I saw it – I know I’m not the only one thinking this way.
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