Month: October 2014

This Isn’t Going to End Well

Part Four: Take the Money and Run

I.C. Angles Investment Post

“You’ve got to know when to hold ‘em. Know when to fold ‘em. Know when to walk away. Know when to run.” — Kenny Rogers, country music singer

“Go on take the money and run.” — The Steve Miller Band, American rock band

Risks around stocks have risen considerably, and even long term investors should now substantially underweight equity exposure. Due to the unique characteristics of this stock market, my best advice is to now treat it as if in the onset of a bear market, regardless of near term price action. At this point in 2014 many warning signs are flashing red—the bond market is signaling weakening growth and greater risk of default, while stock market breadth has deteriorated with many stocks, including small cap and foreign indices, exhibiting extended weakness, while fewer, very large stocks were supporting the market until the recent sell off. The risk versus reward of stock exposure has become too high for an even normal stock allocation, let alone the aggressive allocation most currently posses. It’s time to under weight stocks by taking money out of the market or hedging equity exposure with relation to key technical levels.

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This Isn’t Going to End Well

Part Three: Malignant Growth

I.C. Angles Investment Post

The stock market is enjoying one of the strongest bull markets in its history, but the story is the opposite for the economy, where this recovery represents one of the weakest in U.S. history. And that spells bad news for investors. High-flying stock market valuations and corporate profits reverting back to more normal ranges, as covered in Part One and Part Two of “This Isn’t Going to End Well” aren’t the only reason for investors to fear an especially painful stock market decline. The particularly malignant and unsustainable nature of much of this cycle’s growth is another powerful reason to prepare for a big decline in stocks.

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