Replies to post #19110 on General Stock Ideas

[bigworld]

bar: Whether a person can survive an 80% crash depends a lot on their age and their monthly cash burn. If you own your house outright and you don't live in a high tax area you might survive. But your "golden years" will be a lot leaner. And if your believe market analysts that see the market's fluctuations as deviations and then reversions to the mean you have to conclude that a vastly overbought market will at some point swing toward one that is vastly oversold. I will mention Tobin's Q Ratio again. Invented by Nicholas Kaldor in 1966 and popularized by Nobel Laureate James Tobin, the Q Ratio measures the relative under or over valuation of the stock market. The present reading is now > 3.5.....the previous highest level was 2.1 before the dot.com crash. The average Q ratio is 0.87, and the lowest it ever got, meaning the most oversold, was 0.28. So even if the markets fall to bring the Q Ratio to it's average of 0.87 we'd see a substantial drop in equities. But such a drop would be in the context of a generational Bear Market as studied and written about by Laurence Kolticoff of Boston University. Which means the market would probably overshoot to a very oversold level. So we're talking about an 80% haircut like you say, or worse in fixed Dollars. Such a drop would not recover that quickly because such a drop would undermine confidence in the Dollar and bankrupt every bank, pension fund, and insurance company in the country. And it would take the rest of the World down with it.

So while you perhaps cannot time the market it is prudent to trim your sails in gale force winds. If I were you I would have to lighten up and sell some stock this year, especially with the possibility of Bozo Biden and his commie-cronies raising capital gains taxes next year. Their proposed rate increase on capital gains is a substantial one. And even if they don't get their whole enchilada they are likely to get some increase passed. Locking in gains with the Q Ratio at > 3.5 would not be a move borne out of fear or greed. It would just be prudent. I'm not saying sell it all. But cutting 1/3 or 1/2 and getting defensive would probably serve you very well over the next couple of years. Fed Money printing can't keep the big Ponzi going forever.