“Timing; it is all about Timing!” “ Know when to get off!” “There are times to be aggressive and times to be cautious!” “It is not what you make, but what you keep that Counts” “Trees do not grow to the sky!” These adages are especially true today regarding the Historic levels of both the Stock and Bond Markets. These sayings mimic real life experience and explain that Life is a series of Cycles that ebb and flow throughout History. It is Wisdom that allows one the courage to ACT! Courage will be needed to recognize danger and courage will be needed to Preserve your Wealth for the Future!
Stock Market Cycles have characteristics of a Wave Pattern that peaks about every 7 years; examples of the latest bubbles are March 2000, then December 2007 (7.5 years), and now almost 10 years from the last Stock Market Peak; courtesy of the World’s Central Banks. The final push to the top often is exaggerated with huge gains associated with the Peaking Process.; a vertical price appreciation spike often develops near the cycle end, adding to the Mania. The Mantra of “This Time is Different” is almost universal in the topping process as no one wants to believe the “Good Times” are ending. The Federal Reserve has announced it will no longer support the markets; rather, the Fed is withdrawing liquidity at a scheduled rate of $510 Billion for 2018. The “Good Times” are over! The Central Banks of the World have also declared their intention to bring Central Bank purchases to a screeching halt from $2 Trillion to ZERO by April of 2018. Beware, the Party IS OVER!! “What goes up, must come down.”
If the Cycle has been artificially stretched by Central Bank intervention and the Banks have declared their intentions to end this intervention in BOTH the Stock and Bond Markets, it is time to “Jump Ship”. One does not need to be fully invested at all times. Numerous Private and Institutional Clients have already begun to take profits. Perhaps removing the original investment from any Risk or “Harm’s Way” would be prudent; parking the proceeds in Cash. Preserving Wealth will allow one to participate in different Investment Cycles such as the Commodity Cycle that appears to be in the bottoming process. Much of the Price Risk has been “Drained” from that Asset class as the demand for Raw Materials has “fallen off a cliff” and is beginning to show some signs of improvement. The Commodity Cycle, once it starts to rise, often completes in 7.5 years; plenty of time to season more true Wealth. Consider this, the Housing Cycle is a much longer cycle of 18.5 years that should Peak and Possibly Spike in the 2023/24 time frame. Investing in Housing now will allow participation in the Commodity Cycle as well as the Real Estate Cycle. Raw Materials are necessary for Construction, as they inflate, housing will follow; thus benefiting from two powerful trends.