Buy on Rumor, Sell on Fact

bee

Tim Knight, a permabear, wrote this morning, we have hit 7/7 for Ray Dalio’s metrics for bubbles.

The day of reckoning for business verticals like commercial real estate hasn’t happened yet. Everything has been artificially propped up by government spending, stimulus, and the like. The stock market is up 100% since last March. That cannot go on. The old adage was when you heard stock tips from your shoeshine guy, sell. Or, as Peter Lynch used to say, if he was shopping at a mall and heard everyone talking about the stock market, it was time to sell.

I suspect in April when we have herd immunity and more people get the vaccine for Covid, the cracks in the egg will become a bit more severe. Remember, buy on rumor, sell on fact.

Article:
pointsandfigures.com/2021/02/22/it-might-be-time-to-become-a-bear/

The canary in the coal mine...Cryptocurrencies.

Seven of Seven:

I’ll say one general thing, however: in spite of my growing interest in crypto, and the cool stuff I’m doing with the data (like CryptoStream, shown below), the real “canary in the coal mine” is going to be Bitcoin. Hear me now and believe me later: if and when this crypto mania ends, ALL assets are going to get destroyed. The reason? Because the fever will have finally broken. People will finally realize they have gone stark raving mad, and they will choose to no longer do so. Promise.

https://slopeofhope.com

To me, all the questions are a sideshow to the main story here which is the price of Bitcoin and Ethereum. As long as these are rocking, nobody is going to worry about overpaying for NFTs. But Bitcoin has a history of crashing, so if and when that happens, then we’ll really see what these things are made of.

im-in-the-mania

WABAC

While no one can predict when the market will fall, there are multiple reasons to think that it won't go up forever.

I have already sold all the discreet bond funds in my IRA. There was just too much success to leave on the table while interest rates trickle up. I haven't touched the balanced funds.

I am now selling equity funds to rearrange the deck chairs in the IRA, and take some profit.

At the end of this process I will hold more funds than I previously held. Christine Benz would be so disappointed in me.

Mark

@WABAC - have you sold all of your bond funds on the expectation of a rise in rates? I'm just trying to understand why anyone would do this while those who control the rates indicate no interest or reason for doing so at this time. I read the articles and I've listened to all the chatter and I just don't see what indications are pointing to a need for disposing bond funds.

Sven

Good point.

WABAC

Mark said:

@WABAC - have you sold all of your bond funds on the expectation of a rise in rates? I'm just trying to understand why anyone would do this while those who control the rates indicate no interest or reason for doing so at this time. I read the articles and I've listened to all the chatter and I just don't see what indications are pointing to a need for disposing bond funds.

Rates can go up even if the Fed isn't actively raising them. Rates will go up if the bonds don't sell.

I found this article this morning.

The 10-year U.S. Treasury yield topped the 1.49% level on Thursday morning, its highest level in more than a year. . .

. . . The move higher in rates is unnerving investors fearing inflation could be driving it instead of just the economy recovering. The 10-year yield ended January at 1.09%. It closed 2020 well under 1%. So it’s moved more than a half percentage point in under two months, quite rapid for the bond market and relative to rates at these historically low levels.

I don't particularly like bond funds. So rather than watch some remarkable gains -- for bonds -- evaporate, I decided to sell. When I'm ahead 8% on a TIPs index fund it's no fun for me to watch the drip, drip, drip. And so on with the other funds, even if the returns were smaller.

I still have assets that will do well if inflation explodes. FFRHX has been going up while my other bond funds have been going down. MERKX has shown signs of life. But so far, there aren't any wins to lock in.

I might move into ultra-short bond funds if they offer any improvement over Vanguard's money-market settlement fund.

I'm late on reexamining, and re-balancing, my portfolio for the year. For the past 14-15 months I have been as completely invested as I have been for a while. So this season I have been taking some profits, closing positions I no longer have faith in, and generally raising cash.

Mark

Ok, fair enough I suppose but after reading the article I sense more than an ample amount of speculation rather than actionable facts at this time. However I do understand your reasoning and your explanation helped. Thank you.

WABAC

Mark said:

Ok, fair enough I suppose but after reading the article I sense more than an ample amount of speculation rather than actionable facts at this time. However I do understand your reasoning and your explanation helped. Thank you.

De nada. I like to have cash on hand for buying opportunities. That means I have to take some profit somewhere from time to time.

Observant1

WABAC said:

I might move into ultra-short bond funds if they offer any improvement over Vanguard's money-market settlement fund.

You may want to look into VUSFX.

carew388

Also, in the second quarter 2021, Vanguard plans to launch an etf version of VUSBX .

JonGaltIII

@Mark I got rid of all bonds except a very small position in FXNAX. My FNBGX was up quite a bit in 2020 (not sure why and it still trailed S&P index), thankfully I sold before 2021. Why? It’s down 10% YTD. I’m having a very hard time justifying any bond exposure right now. Actually, when I look back at the last 10-15 years, I held too many bonds (in case of?) and at the expense of many years of equity superiority. The crash(s) where bonds outperformed and helped me were few and far between. But I’m still learning and don’t know what I don’t know.

WABAC

Observant1 said:

WABAC said:

I might move into ultra-short bond funds if they offer any improvement over Vanguard's money-market settlement fund.

You may want to look into VUSFX.

Thanks for the tip. I'm at Vanguard, so that'll probably turn up when I get through rearranging the rest of the deck chairs and start looking at bonds again.

I run all my options through MultiSearch on the MFO premium site and see what's left. Then I look at the strategy, or underlying index thesis.