The utter lack of cause and effect relationship between what is happening in the economy and the financial market place may continue for a while, with Nasdaq going flame-out at 3,600, then plunging downward again to 2,500. This next plunge with see many current burger fodder press the ejection button, only to see themselves bop in the oil spill, made into burgers at altitude 1,400 or below.
The "give back" after manic action can be around 5 years of gains, or 100% of the gain since take-off, and the average return of the share market should be around 10-12% per annum. However one counts it, Nasdaq can easily go to 1,400 and even below.
If the economy is the market and the market has become the economy, it is best that we prepare for the possibilities.
My general direction over the next 12 months is to work my liquid assets thus ...
(a) sell puts on resource stocks and hold resulting equity if putted (tree growth, fuel deposits, gold, platinum) decisively, but after research on the former two items;
(b) move $ to Euro slowly;
(c) move from longer to short duration bonds at speed. Basically to staggered risk-free strips ala cash and maybe some inflation protected TIPS; and
(d) Buy emerging market equities, but very slowly as there will be splash damage on already beaten down banana republic equities.
I am suspicious that the maestro will, is willing to and wants to, do anything to support the market/economy at the cost of the dollar, inflation, and turning the US into a banana republic look-alike where the returns may well trail the near dead emerging markets (China, Peru, Philippines, Indonesia ... need to research again, widely diversify across geography, focusing on only the strongest companies providing essential services and/or controlling essential resources).
I know this sounds crazy in view of the US performance over the past 10 years and I may therefore may be making this journey alone, away from the crowds.
I welcome discussion along anything resembling the above indicated direction (not in accordance with any CNBC map).
Chugs, Jay |
