Alright, since the COVID-19 Pandemic began, I’ve been saying I’m staying out of the markets until Labor Day Weekend. After sitting back and watching the parabolic rise in equity stock price with trailing fundamentals, I personally did not want to get trapped in a bubble. So here we sit at Labor Day weekend and not much has changed. While the economy is opening back up in most states (my home state of California included), interest rates are expected to remain at historic lows for many years to come, unemployment is dropping and we’re beginning to get a sense of who may win the election, we’re still looking at irreparable damage to the economy for quite some time. I may have indicated in previous posts that the aftermath of a hurricane is almost always worse than the storm. Now, with the news that option traders have been driving up large caps, particularly in the NASDAQ, I’ve determined that all signs point to a sell in September (potential crash in the markets). As the banks appear to still be well capitalized, all it takes is one large shock to change things and send the whole markets crashing down. As such, I’ve decided to put some of that extra cash I’ve accumulated since the pandemic started to work as it’s way easier to make money on an elevator falling, than what seems like a phony escalator increasing. Whether you question the seriousness of COVID-19 or not, we still don’t have any type of cure, we’re heading into flu season, Softbank has been accused of market manipulation in option trading and there’s still the potential Trump has something up his sleeve. So from now until December, I’m selectively going to short the market. Note, I do not expect a market crash, but I’m pretty sure this is the last leg of the bull market which began in April 2019. Something’s gotta give…on to the Top 5
- Cash ($40K – $80K) – Don’t ever bet the farm
- Real Estate – Even if the markets do crash, rates aren’t going anywhere and you’ll still make money on the spread paying down a mortgage faster when the real recovery sets in. Plus if history has taught us a lesson, when the dotcom bubble burst, investors tend to invest in things off-market, like housing
- UVXY – This to me is the tell all indicator. As long as it’s above $25/share, easy money. If it starts accelerating up, push more money in
- SQQQ/WEBS – Purely speculative, but I think the NASDAQ’s gotta give
- SDOW – As I mentioned last month, the DOW looked like the weakest index. I think someone must have heard me as they rebalanced it last month to strengthen it a little, but I wouldn’t be surprised if it pulled back to 25,000. If it drops under 20,000, look out below…
Again, if the government steps in and gives more money to people out of work, I’m not sure how it helps the markets now as we’ve seen before that no one want to catch a falling knife. I could be absolutely wrong on all of this, but I don’t see how the current rally is sustainable at a time of the year when crashes usually occur.