Playing It Safe
This article was written by Charles Hugh Smith on the OfTwoMinds blog. Smith discusses the current state of the stock market and how he would personally invest if he had to rollover a pot of money from a 401K in the next month. He emphasizes that his answer is not investment advice, but rather a response to a direct question from a reader.
What Does "Safe" Mean?
Smith's answer to the question is that he would play it safe. He explains that what "safe" means can vary from person to person. For him, "safe" means cash and cash equivalents that earn some sort of yield, such as short-term Treasury bills, notes, or bonds which he can buy via TreasuryDirect.gov. For others, "safe" may mean a different asset or diversifying their bets in the casino.
Reasons to Play It Safe
Smith provides two reasons for his decision to play it safe. Firstly, he points out that Mr. Buffett recently sold a significant amount of Apple stock, which Smith views as a clear signal of how Mr. Buffett sees valuations and the global economy. Secondly, Smith notes that the violent crashes and rallies experienced in August are not signs of a healthy, stable stock market.
Additional Considerations
Smith also mentions two additional points to consider. The percentage of household wealth in stocks has reached an all-time high, which has a strong correlation with major multi-year tops in the stock market. Furthermore, volatility remains complacently untroubled. Smith warns that recency bias has made punters extremely complacent and confident that buying the dip will be rewarded every time and that the Federal Reserve will save the stock market from any trouble.
Bottom Line
In conclusion, Smith suggests that playing it safe may be the best course of action given the current state of the stock market. However, he emphasizes that this is his personal opinion based on his own circumstances and not investment advice. What do you think about Smith's perspective? Do you agree or disagree with his views? Share your thoughts with your friends and consider signing up for the Daily Briefing, which is every day at 6pm.
