I feel like I’m waggling back and forth on a strange tightrope, as I’ve been doing for about a year and a half now, and I sum it up kinda like this:
I’m quite nervous about the valuations of the overall market and about the massive debt load for both governments and individuals in the US and elsewhere, particularly China and Japan, and I continue to worry about inflation, too, and the impact of rising interest rates on a very richly valued stock market… but I’m also really interested in the growth prospects of some amazing companies, and think some dividend growth companies remain fairly priced, and, most of all, I’m very leery of making big “market timing” decisions because of the very high probability that I’ll be wrong, so I don’t want to exit the market just because I’m nervous.
So I watch my stop loss levels, particularly for the stocks that I am most nervous about or that have an outsize impact on my portfolio, and I try to keep cash positions high so I’m ready to buy more stocks if we do get a real downdraft in the market… and I’m thankful that I don’t manage other peoples’ money so no one is breathing down my neck to see if I’m beating the S&P 500 in any given week (I put plenty of pressure on myself already, thanks, even though I know short-term performance doesn’t mean much — and yes, I do check it way too often, so in case you’re curious my portfolio is up about 13% YTD vs. the S&P’s 10%… woohoo!)
And when I see thoughtful commentary from people I really respect, I do have a tendency lately to get even more nervous… though I’m still not in “sell” mode. This week we had a great bit of thought (again) from Howard Marks, who every investor should read… no one does a really good job of predicting all shifts in cycles in the market, but I’d trust him to come a lot closer than most. He was well-covered this week, partly because he has a book coming out, so you may have run across him in your musings… but if not, read the memo.
Maybe the reason I like Marks is that he’s not often driven by precise numbers or chart formations — a forward PE of 25 does not mean ...