On December 4, 2016, Bloomberg reminded us of what then Federal Reserve Chairman Alan Greenspan, now 90 according to MarketWatch, famous speech about “Irrational Exuberance.” He was years ahead of himself. “The central banker once dubbed ‘the maestro’ was speaking as the S&P 500 Index headed for its best two-year surge in four decades, up more than 60 percent. Yet his words did famously little to halt a five-year rally that saw the gauge triple in price by the end of 1999,” wrote Garfield Clinton Reynolds and Adam Haigh. Now might be a good time to plan for how you might reduce the beatings investors took in 2000-02 and again in 2008-09.
In the article Greenspan speaking in a December 3, 2016 Wall Street Journal interview was aware of how his warning had little, if any, impact and repeated his view that “bubbles are almost impossible to stop once they get going.”
“It’s like déjà vu all over again!” – Yogi Berra
Mike Burnick at the Edelson Institute on October 2, 2017 wrote, “It seems nothing can knock a good bull down. But if you look closely, this one appears to be running out of breath. (No, that’s not a typo, as you’ll see in a moment.)” The S&P 500 is enjoying a great bull run hitting new highs despite a sniper in Las Vegas, Catalonia voting to secede from Spain, rashes of hurricanes and earthquakes doing great damage to life and property.
Burnick wrote, “Let’s recap just how far this bull has run..
The bull market that began in March 2009 is now the second-longest AND the second-strongest bull market of all time. (In price appreciation; third-best in total return, dividends included.) The bulls have been running on Wall Street for 3,121 days, and counting. Over that period, the S&P 500 Total Return Index is up nearly 350%, overtaking the 1949-’56 bull market as the second-best. But as much as everyone likes seeing their stocks go up, this has likewise been one of the ‘most hated’ bull markets in history. In fact, it has been nearly 600 days since the stock market last experienced a 10%+ correction, way back in February, 2016.”
I don’t know Burnick but I do agree that are “three red flags” worth watching now that could signal a reversal of fortune. Before we go down the list let’s say hypothetically sometime in the next thirty days two of the three flags start waving for your attention. The question I want you to answer now is, what is your exit strategy?
Treasury yields have risen steadily since Sept.1. If junk bond prices start to plunge, it’s a sure sign credit conditions are tightening, and a stock market swoon won’t be far behind.”
(Extreme Wall Street bullishness has historically been a bearish signal, and a recent reading shows just that. Bank of America Merrill Lynch Global Research). From Business Insider, October 2, 2017
This “Sell Side Indicator” from is based on a monthly survey of Wall Street analysts that shows “extreme bullishness” on stocks, which monitors investor exuberance. Author Joe Ciolli wrote, it “is now nearly two standard deviations above its four-year average.”
On the road of life, no one knows what’s around the next curve. But it is worthy of note that no matter how little you spend on a new car these days, there are at least 16 computers to keep you safe, no matter how you leave that car. All of the systems work for you and you don’t even know they are there as you are busy doing what you do every day. My first point, is if the systems can do that work, what systems will you put in place now that can help keep your assets safe? Let me repeat myself in my second point. Given what has happened recently in the Gulf, Puerto Rico, and Las Vegas we can agree that when disaster strikes, there is no time to prepare. I’m not saying sell now. I am saying plan now.
The proof is in the planning.
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