Investments, China, Trump, etc.
This has been a very weird stock market. Most investors seem to understand the rally is looking long in the tooth on a variety of measures (including the cyclically adjusted PE), comparable only to the euphoria of 1929 and the Internet bubble over the turn of the century. But calling a top is notoriously risky; just witness how long it took for the real estate bubble in the last decade to top. It seemed obvious that prices were in a mania; prices were outstripping earnings, record percentage of home ownership: people were buying property without income verification, without savings and/or a traditional down payment. The only question in that game of musical chairs was when would the music stop.If and when the current bubble pops is anyone's guess. However, it could continue for some time; For one thing, there aren't a lot of bullish investors, and tops usually occur during euphoric groupthink. Second, a lot of baby boomers, many of who lost a huge chunk of retirement savings during the Internet bust, Enron and other scandals, and the 2008 economic tsunami, never mind stagnant wages during the new century, are transitioning into retirement; the Federal Reserve's unprecedented 8-year assault on interest rates has largely crippled residual savings and fixed-income alternative to the point of anemic returns don't even keep pace with inflation, never mind recover lost ground during the corrections.
I suspect that there have been a lot wary investors who have been sitting on the sidelines as stock indexes, including the long below-water post-2000 Nasdaq, have roared to all-time highs, even though we haven't seen 3% growth since the Bush Administration (2005). Stocks have sprinted over the 6 months since Trump's election, I think inspired by hopes of tax and spending cuts, regulatory reform, and an infrastructure program. I'm not necessarily opposed to Trump's initiatives (the devil is in the details); but I'm wary of the effectiveness of policies when the national debt exceeds the GDP, and at best Trump is merely slowing the rise of the State. He isn't talking about unsustainable entitlements, he's expanding defense spending, he's left TPP and is escalating tensions within NAFTA. Although I think he stopped further damage of a prospective Clinton Administration on domestic polices, I think the post-election rally is running ahead of itself; I don't know if it's being fueled by retail investors, foreign buyers and/or other factors, but I don't see it as sustainable.
I am also concerned about the narrow focus of recent gains, much of it concentrated in the form of 4 tech issues: Amazon, Google, Apple, and NetFlix. I had a number of shares in my retirement account in one of those and sold earlier this week for a decent profit (just to see the stock tick up even higher). I would prefer to let my winners ride, but among other things, I get nervous (especially since the Enron collapse) of huge companies running up stock prices without a story at high market valuations. I already have a tech ETF position that likely includes the security and didn't want to overweight the sector in my holdings. The ETF does not protect against a general stock market or sector correction, but it is more diversified and controls for single company risk (still, at the expense of above-sector returns).
There's been a lot of discussion of a strong dollar vs. a weak dollar. Trump has added to the confusion with his obsession over exports where he finds a stronger dollar good for imports, bad for exports. In fact, a strong dollar is generally preferred for a variety of reasons: imported resources as factors of production are cheaper, it encourages investments (profits and assets are worth more); it affords a higher standard of living, lower prices; it's anti-inflationary. You can see this in the context of foreign vacation: your dollar stretches out more as expenses lessen with the currency. As an investor, you benefit as foreign investors compete to buy related assets.
China has some huge problems as it tries to pivot into more of a consumer-driven economy. Other countries (e.g., Vietnam) are competing in the export-driven business model space with labor-intensive factories operating on thin margins. The Communist leadership is still propping up state-owned operations, has malinvested in notorious ghost cities and subsidizing money-losing boondoggle supertrains. In the meanwhile. foreign reserves have dropped to the $3T level.
In the meanwhile, and this is one of the key things that bothers me, the oil market continues to struggle with a supply glut, and many commodities are struggling. As the Fed increases interest rates (I would prefer a float), it also pushes interest rates in emerging markets, not to mention the Fed has always been a day late and a dollar short. We are seeing excess capacity, particularly in the natural resources space. In addition, a number of sectors are suffering--banks retailers, energy, biotech, real estate, etc. The high tech sector is one of the few thriving sectors, but I still have strong memories of the Internet economy bust. I was doing a lot of ERP upgrade projects at the time when the consulting company I was working for was essentially shuttered by its backing venture capitalists; I was working for up to 4 different clients per week (this may sound okay if you're working as a plumber, but as a consultant, I normally work on the level of weeks to months on a dedicated project. In this case, I was sent out on micro-engagements, mostly to mentor client resources, a strategy my company was using to keep their foot in the door, hoping for follow-up large-staff upgrade billing.)
I have taken some money off the table, I'm keeping my current investments on a short leash, and I've reduced my exposure to single issues, but I also keep in mind the market corrections usually don't happen with the decent economic indicators that we have now. As always, keep in mind that you assume due responsibility for your own investments, do your due diligence, and remember that past performance does not guarantee future results.
On the Whole, Left-Fascists Are Worse Than Alt-Righters
I have been toning down more adversarial tweets, but I occasionally will troll political tweets on hashtag games. Just to give an example, there was an earlier game based on "I Wake Up Because" where a significant number of Trump Derangement Syndrome responses appeared. Somehow it has become customary or acceptable in "progressive" circles to response to anything as if they were being asked, "How bad is Donald Trump?" One of the trending stories on Facebook today was Hillary Clinton's commencement address at her alma mater, where she bashed Trump (as if she hadn't made the point during the last 2 years of an election campaign).I haven't done a content analysis, but informally, it seems that leftist-bashing outnumbers right-wing bashing 4-1. One of the common themes you'll see is the Obama cultists saying they remember what a "real" President was like. And I don't really see the right-wing responding to that--to the point I'll respond with an anti-Obama response (which often generates a good number of impressions). Believe me, it's not because I love Trump.
I wrote a recent thread of tweets explaining how I think I would approach dealing with Trump if I were still a member of the Democratic Party as in my salad days. What the Democrats are doing is actually counterproductive; as bad as Trump has muddled through the first months of his terms, it's almost as if the Democrats have a death wish. They haven't learned a single lesson from Clinton's loss.
