Most people work hard for their money and even harder to save a bit of it but they are often lulled into complacency when it comes to protecting it. One of the saddest things to witness is when someone who has worked very hard suddenly becomes penniless because an investment or economy turns south. I'm reminded of Ernest Hemingway's line from The Sun Also Rises, "How did you go bankrupt?" "Two ways, gradually and then suddenly." It can be used to describable just how wicked markets can be. We should remember the stock market has far exceeded the upside expectations of many bulls while the economy has not fared nearly as well in many respects.
Timing a market top is difficult, the question I again put forth is, are we reaching the turning point? A turning point can signify a historic or watershed event that is looked back on and comment upon for years, market crashes, the great depression, major economic shifts can fall into this category. In the past, I have written about the unpredictability of predictions and how a random black swan crashing through your front window plays havoc with the idea of always and never. For a decade America and much of the world has been washed along on a wave of freshly printed money and low-interest rates and while many people think it has ended, just last week the Peoples Bank Of China unleashed more support to the Chinese market.
|This Chart Screams Confusion Clear And Simple|
Several strong reasons exist to be pessimistic about the economy going forward. Washington has failed to make the reforms necessary to make America more competitive and consumers are not in a position to spend the economy forward because a large number of Americans have dropped out of the workforce or chosen to only work part-time often at jobs that pay poorly with few or no benefits. This comes at a time many retails stores are closing under the assault of growing online sales aided by our very own United States Parcel Service delivering packages under cost and even on Sundays. Sadly, the only sector guaranteed to be strong is defense based on government spending but that is not enough to carry us forward.
Circling back to the main theme of this piece which centers on just how difficult it is to time a market top and how costly being wrong can be it should be pointed out that in many ways the stakes have been raised and are much higher than usual in this cycle because it has gone longer and farther than most investors expected. Two things are certain the first is most traders are a bit nervous following the market action last week and the next few days will be fraught with uncertainty. This translates into the idea markets may be volatile and caution is in order. Remember at some point "buy the dip" will become the kiss of death.
Footnote; In my readings today I happened across a passage on another blog where the writer speculated the "Three Amigos of collapse" might be ready to converge, he described these as Murphy’s law meets the law of unintended consequences and the law of diminishing returns. The piece below written in February questions whether it was "Too Early To Call A Market Top?" We now know it was but we have not been blessed with much in the way of good news since that time. The link to that article can be found below.