It is extremely difficult to differentiate between the short and medium/long term at the moment. As I assume that this time is no different, and therefore the key figures of valuation/profit margins etc. remain unchanged, there is a high, indeed very high probability that there will soon be some very lean stock market return years....(probably for 5-10 years).
The market is driven by the hope, glass-half-full mentality. As Marko Papic said, the market is currently looking through everything. The hope that everything can be better in a few months is the oil that continues to fuel the market, alongside the balance sheets pumped up by QE and fiscal spending. Any attempt to short except for a few % will burn your fingers.
Looking back, I am sure that all the ingredients for a bubble could then be clearly identified. We know exactly these ingredients now, but they are currently being interpreted differently.
If the market then collapses, it will probably fall significantly below these critical thresholds (-20%), because only then will the BTFD logic become untenable.
Until then, be with one foot at least in the market, but be ready, have hedges ready. Then, like André, concentrate on sideways returns for many years - I am all in favour of this logic
Thank you for your insightful participation Andi, much appreciated. The problem with "be with one foot at least in the market, but be ready, have hedges ready" is that it is like picking up the proverbial nickles in front of the steam roller. A combination of portfolio "stabalisers" and convexity via optionality could be a decent approach.
Exactly, that's what I have in mind too. However, a multi-pronged approach also makes sense when hedging in order to answer the other question of whether to hedge tail or partial...
It is extremely difficult to differentiate between the short and medium/long term at the moment. As I assume that this time is no different, and therefore the key figures of valuation/profit margins etc. remain unchanged, there is a high, indeed very high probability that there will soon be some very lean stock market return years....(probably for 5-10 years).
The market is driven by the hope, glass-half-full mentality. As Marko Papic said, the market is currently looking through everything. The hope that everything can be better in a few months is the oil that continues to fuel the market, alongside the balance sheets pumped up by QE and fiscal spending. Any attempt to short except for a few % will burn your fingers.
Looking back, I am sure that all the ingredients for a bubble could then be clearly identified. We know exactly these ingredients now, but they are currently being interpreted differently.
If the market then collapses, it will probably fall significantly below these critical thresholds (-20%), because only then will the BTFD logic become untenable.
Until then, be with one foot at least in the market, but be ready, have hedges ready. Then, like André, concentrate on sideways returns for many years - I am all in favour of this logic
Thank you for your insightful participation Andi, much appreciated. The problem with "be with one foot at least in the market, but be ready, have hedges ready" is that it is like picking up the proverbial nickles in front of the steam roller. A combination of portfolio "stabalisers" and convexity via optionality could be a decent approach.
Exactly, that's what I have in mind too. However, a multi-pronged approach also makes sense when hedging in order to answer the other question of whether to hedge tail or partial...