Sunday, November 12, 2017

If it looks like a duck and it quacks like a duke, it probably is a bull market

Well. I feel the thrill.  And to speak with BB King “the thrill is [not yet] gone”.   This market definite starts to feel, quack and look like a euphoric bull market.

When we have speculative bubbles in bitcoin and other crypto currencies; when oil seems poised to break out to $60 or higher; when we are at 52 week highs in the stock market and when we see the small or ‘mom and pop’ investor return to the stock market we have entered the last inning of this bull market. I know the feeling, I’ve been through it before.  The thing is with bull markets that it can go higher than anyone expects and during bear markets it can go lower than one imagines (not the most original insight). Often, we’re dealing with raw emotions.  There is still a fair bit of pessimism so likely we are not quite euphoric especially with earnings growth predicted for next year in the S&P500 of nearly 11%.  As a rough guess, including multiple expansion, next year’s upside could be 20% or more.  But the peak is getting closer any day. So don’t be afraid of taking profits!

Canadian Banks have been on a tear for now and likely will keep on doing so for the coming months or so. Just a guess.  I plan to take profits in January. Despite gurus dismissing gold, it hasn’t collapsed in price and I wouldn’t be surprised if it goes higher over the coming 6 months or so.  I see $1350 as a distinct possibility. Economic growth is doing two steps forward and one back. Calgary’s oil patch is still in the doldrums but overall, Alberta’s economy is improving. I expect real estate will do fine although it may be a bit depressed in the hottest markets in this country.  If there is truly a recovery in fossil fuel pricing then Alberta real estate will likely start playing catch-up.

Remember the last number of posts; we are playing musical chairs and you may have to cash-in profits on a moment’s notice.  If you get caught in a downturn, don’t sell in a panic. It is better to close your eyes, scream but DO NOT SELL IN A PANIC ON THE WAY DOWN! It may take a couple of years to recover but it will recover, especially if you have some cash on hand for buying opportunities once the market is near bottom or starts to go up.  Many investors are still bearish enough to hold close to 30% in cash; we are not yet euphoric though we’re getting close.

One of my biggest mistakes is that when the money of a late stage bull market starts to roll in, I do not recognize how exceptional that money is. I become sloppy in my investing ways. Oh….  Easy come; easy go!   Who cares, I can always make more in the market. I make more in the market than during my day  job.  Must be a “new economy”.  Those are tempting statements you may also feel yourself or hear around you. Don’t get fooled!   Another one is… ‘Oh I have been waiting so long to make decent profits, now I finally start to make money, so we can’t be near a crash”.  Well, if you think that way or hear others speaking like that, get ready for your musical chair - the peak is near.  You will keep on hearing  “Buy on the dips” but you know that when everyone tells you to ‘buy the dips’, then better start taking profits and sell your shakiest investments.

How long before the next peak?  No idea; 4 months; six months a year?  Not a lot longer.  A perfect crash would be during the re-election campaigns of a certain Notley and a certain Trudeau. You know, those silver spooned closet socialists.  Be careful with the coming energy bull market. I am skeptical regarding a future with electricity destroying fossil fuel demand but… what do I know? Don’t be afraid to put a few irons in the fire for self-driving cars (NOT the Tesla scam though); solar or wind or even nuclear. I am considering solar for my new residence. That is diversification with a green tinge. I may not be an anthropogenic climate change believer but climates do change. I also don’t believe that mankind should limitlessly spew emissions and other harmful chemicals into the environment; especially not if we are going to count 10 billion on this planet within a decade or two. Please, stop pro-creating! 😊

It is quite well possible that we will start a hydrocarbon boom that will be interrupted by a near future stock market crash; after that the energy boom may resume. So, although I think that it is good to invest in energy right now, it most likely will not go up in a straight line; I expect a major set-back in the beginning of this new energy boom.  Well, it is not quite year-end so it’s a bit early for a 2018 forecast; but I am rosy, at least until year-end. Safe investing.

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