I've been slowly layering into a short position against the US S&P 500 stock market. At this rate, I plan to be 80% short in my trading and retirement accounts by the end of May. You know “Sell in May and go away.” I am now at 45%.
That’s my general strategy here.
My reasons for building up this short position are many. Here are a few of them:
- The US stock market is historically expensive at current p/e ratios
- The “e” portion (earnings) of that above ratio is wildly over-stated right now
- All good bull markets must come to an end
- Especially those bull markets manufactured mainly out of thin-air money
- Major economic statistics like global trade volumes and retail sales are very, very soft right now
- Corporate revenues are trending down
- Corporate earnings are trending down
- US manufacturing new orders are still trending lower
In short, this looks very recessionary to me. The recent aggressive, desperate moves by the central banks confirms for me just how worried they really are. And if they are worried, you probably should be, too.
Plus, our thinking here at PeakProsperity.com is that we need to first experience a scary fall in the equity markets before the Fed will feel like it has the necessary political cover to begin Act 2 of this melodrama — which will consist of handing out cash to you and me. Money for Main Street. Helicopter money.
Now, it’s entirely possible that the Fed might decide to just skip the whole political cover idea and jump straight to dishing out the money, mainly because it's election season in the US. The thinking here is that Donald Trump scares the bejeezus out of the political establishment, especially the incumbent presidential party. One way to help guide Hillary into the White House in November would be to keep the US stock market elevated throughout the election.
Well, nothing will make the stock market go quite as bonkers as a helicopter drop. Should that happen, I will be one of the people getting reamed on their short positions. In that case, I'll close them out immediately and go long.
Why? Because the helicopter drop period is when we should all spend as much as we have, as soon as we can, on anything we can buy — and maybe borrow a lot, too, and spend that as well.
by locksmithuk