All Good Things Need A Rest…

Mike Williams | 10th January 2020
Categories
Letter from America

Let's admit that portfolios and the markets have had a great 12 months, following an ugly Q4-2018.

And that bounce-back burning through the lengthy trade range was perfect for the long haul.

But there’s always a but…

Good things all need a rest.  

So, don't get all bent out of shape if dividend stocks, which went up a lot last year, take a pause in the first 6 weeks of this year.  

It’s perfectly normal, and much better for the long-term.

Sentiment Update

The AAII data of late shows a solid start given the series of new highs we saw in December:

I started with the neutral (above) only because it often gets no attention but can provide interesting insights.  

Check where we are now.  

The purple line highlights how little time we spend above this line and what those previous times meant (read:  good for long-term investors).

Granted it often leads to a pause. But the upside is solid in the long run as can be seen below in the "after effect" chart from Bespoke:

So, what are the lessons in the time chart? 

  • Monsters come and go. 
  • The next one is far scarier than the one we just defeated. 
  • Time works. 
  • Time is your friend. 
  • Time defines risk. 
  • Time is your patience being properly valued. 

And one more thing...

Hey, it all can't be good news.

There is always a fly in the ointment which is why I reloaded my supply of fruit-flavoured TUMS over the holidays. 

Here’s The Ugly Spot

The CNN Fear and Greed data is for really, really, short-term minded traders.

And it needs to burn off some of this year-end excitement.  

Hence, a little selling concern is just what the doctor ordered:

In Closing

The Barbell Economy™ is driven by the two record setting generations of our time.  

We are all blessed to be living in these unique times.  

As technology takes over, the economic references to the past no longer bear much weight.  To suggest that some part - any part - of our economy today relates to any event in the 60's, 70's, 80's or 90's etc., is simply a foolish misunderstanding of reality. 

There is nothing left of the economy we lived in during those times. 

Hence, comparing today - and/or the tomorrows to come - to those periods in the past is a great scare tactic, a wonderful emotional triggering event - but useless to your personal interests and future wealth goals. 

Relax friends, our very best days are ahead.