A Tourist on vacation in Las Vegas can pick up the dice at the Craps Table and start a winning streak. Throwing the dice to win 5 times in a row and the casual gambler is becoming convinced the “House” will be paying for a Steak Dinner and a nice bottle of wine. Win 7 times and the Vacation is paid, 9 times and the Kids’ College can be funded, and in just a little more time, the casual gambler is now a “Pro” on his way to “breaking the House”. Just one more throw of the dice to complete “Financial Freedom”. A great Plan until it no longer works; disaster, catastrophe, an unforeseen calamity! All of the Cocktail Waitresses, Dealers, and Pit Bosses knew the streak would end; they had seen it many times before. In the Casino on Wall Street, the Dealers have seen this before; three Stock Bubbles in 20 years. Just like in Vegas, you have to know when to quit!
The signs have been there for quite a while; P/E’s over 30, Historic Margin Debt, declining Commercial and Industrial Loans, Technicals of Advance-Decline and 200 day Moving Average deterioration are signaling a tired and aging Stock Market. Further, historically, Stock Markets last about 85-90 months; this one is very old at 103 months. Just a little longer; everything is Awesome! Until it’s NOT! Greed can overcome Prudence and it is Prudent to pay attention and maybe take some Profits! The Pit Bosses and Dealers will not tell you when it is time to leave; they want your money to remain in the Casino. The true Winners know to walkaway when you are up.
The cycle for the Stocks is historically about 7.5 years; the best gains are often at the very end. Is the Trump rally signaling a potential End? Since Election Night, the Stock Market has gained 15%; almost straight up without even a pullback. Perhaps simply re-arranging assets could protect the portfolio. Accumulating assets with Cash Flow components that mitigate Economic Stress and transitioning into asset classes with longer cycles can be safer from catastrophic declines. Conservative entry level single family homes rented to credit worthy families can be a careful Strategy with consistent Income to mitigate any Economic downturn and allow one to sleep well at night (SWAN). Charts for US Real Estate project 7-9 years before the start of the cycle’s completion. Plenty of time to accumulate a strong portfolio for future profits while providing monthly Income to fund Cruises to the South Pacific or pay bills if the Business Cycle slows. Residential Rentals have a Use Factor; they are a necessity like Food, Water, and Shelter and may be a Lifeboat in an Economic Storm.
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