Don’t Fight The Free Money. Yet. (No Paywall).

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Don’t Overthink It.

by Alex King

We are presently in a bully-o-bull market where all you need to do to make money is to be long and observant. The market will turn, as it always does, but as I say each and every day in our Market On Open notes, it is much better to react to markets than to predict. Predicting involves cobbling together random pieces of evidence from across the spectrum - macroeconomics (the "dismal science”), politics, microeconomics, the news, what the kid at the bus stop just said, all that. Whereas reacting requires only two things. One, watch price, and two, have a moderately accurate method of measuring price changes. That’s it. The more you treat securities markets as systems in and of themselves and the less you allow your own feelings, the news, politics, anything from outside the system to interfere, the better you will likely do.

At present I can see a lot of people not gaining full benefit of this free-money market, because they are too worried about it ending tomorrow. But we will all know if it ends tomorrow, because prices will stop going up. If you assume you won’t sell or hedge at the top, but instead slightly after the top, again, probably you will do better than if you sell before the top because, in one’s own faulty judgment (all our judgments are faulty - again, price is the only thing that isn’t faulty), the top must come soon.

We will be in another bear market soon enough, of course, but we will know when we are in it. Because price will be coming down. And then all one has to do is the opposite to now. Hold short index ETFs instead of long index ETFs. (Personally I will probably dispense with single-name stocks entirely in the next bear market because it’s too hard to work out which will prosper and which will not. Sector ETFs are about as granular as I plan to be at that point).

But for now? Up is up, until it isn’t. Enjoy the ride.

And if you want to learn how to get ready for the next bear, and then when it hits, how to profit from it in real time? Join our Inner Circle service where we teach how to measure price movements, how to see when price has turned, how to hedge, how to make money from the long and short side, and we also post all such Cestrian staff personal account trades before they are placed.

Don’t overthink it.

Cestrian Capital Research, Inc - 13 June 2024.