The Market is Nearing the End of the Runway
Hope everyone is safe and profitable! The US market has been breaching all time high with all three markets hitting all time high.
So what shall we do during this period in time? I spoke about it briefly in a recent LIVE so if you don’t have the time to read this email, you can watch it here.
An Analogy to Flying
In my previous life in the military, I had the great fortune to learn how to fly and taste the freedom of soaring through the skies and clouds.
However, unknown to many, flying is actually very risky.
All it takes is one loose bolt or a frayed wire and you will be on your way to the ground. Among them all, TAKING OFF is perhaps the most dangerous part of flying.
Because you are accelerating down the runway and gaining momentum, once past a certain threshold, you are COMMITTED to take off.
Why? Because it takes a long distance to slow down a speeding jet, and once you are past a certain point, there is no turning back. Any attempt to abort the takeoff will end up in the the jet going beyond the runway.
How Is This Related to Investing?
The market is now speeding down the runway, we are recovering from an almost year long COVID recession and the market wants to TAKE OFF.
However, beyond the market’s runway is not just grass patches. It is a CLIFF.
From here onwards, the market is either going to TAKE OFF to the skies or FALL OFF a cliff.
It will be anything but gradual.
Therefore, my short term view about the market now is one of CAUTION.
If the market is unable to take off with momentum, it is likely to run out of runway and fall off a cliff.
So I want to position myself such that I can take advantage of the take off (should it happen) and protect myself from falling off the cliff (should it happen too)
Now take note that I said SHORT TERM VIEW because I am immensely optimistic about the long term bullish trend still. o
What is Pete Doing?
Right now, for me, my students and my clients, I am reducing all short term or speculative positions and only keeping core long term positions. Any investment that is not rock solid, I am reducing or even removing.
I want to be very selective with my investments now. ONLY investments that I can invest with great conviction will be part of the portfolio.
Right now, in my view, it is not the time to take on unnecessary risk.
Remember Warren Buffett’s first rule: Never lose money. And I need not mention about the second rule.
“You may run through a gunpowder factory with a lit candle and survive, but you are still an idiot for doing so” – Anon
