I don’t understand the stock market anymore and in the short term, I’ve decided to give up. As the Dow Jones bounces around 30,000 and the Schiller S&P 500 PE sits above 33 (average is 16), nothing makes sense to me. We are still in a global pandemic – the economic fallout of which isn’t fully understood yet – aren’t we?
I called our financial planner and asked him to sell stocks equal to an extra two year’s worth of spending last week. Increasing our cash buffer in the event of a downturn seems to be more logical than expecting the current government-stimulus fueled bubble will keep growing.
I guess a more optimistic way to characterize the move as ‘profit taking’ after a surprisingly good year. My sell MegaCorp options high, reinvest into panicked index funds on St Patrick’s Day was my best move in 10 years. Now, as the market seems ‘irrationally exuberant’ we’ll cash some equities out.
Maybe I’ll even stay ahead of a potential 2021 increase in income/capital gains taxes. It’s pretty likely that if the Democrats win one-party control of Washington DC, taxes of all sorts will be on the rise.
I’m certainly still optimistic about the market over the longer horizon. Increasing our cash position now comes at little perceived downside, since we’ll need the money sooner or later and inflation is unlikely to punish us too much in the short-term. This will put our cash position at about 3.5 years spending. I’ve been trying to keep it at 2-3 years ‘buffer’ since I stopped working.
Anyone else ‘profit taking’ before the end of the year?
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