Do you want a job? Working with me?
Good, I thought so.
I’m after a research assistant. Read on, below, for details.
S&P 500 climbing to all-time highs
With the US economy strong and the corporate earnings season delivering another round of healthy profit growth, the S&P 500 is getting very close to reaching its all-time high from January.
It’s also very close to being the longest bull market EVER.
Will the bull market break through the old highs and go on rising? Or will it hit the ceiling at the old highs, forming a ‘double top’.
I have an opinion on that, but not an answer. And because opinions are worthless when it comes to investing, they’re not much better than guesses, especially in the short term.
You’re better off dealing in probabilities. The way I think about it is this: The bull market (as shown in the chart below) has been running since March 2009. It’s had a few pullbacks along the way, but nothing too dramatic.
Early this year it made a parabolic move and then corrected sharply. This is often (but not always) an indication of a top. And often (but not always) after the initial sell-off, stocks rally back to the old highs before turning down again, confirming that the market has really topped out.
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There’s a chance of that happening here. To be really unhelpful, there is also a chance that stocks will break higher and the bull will keep running.
The problem is that our brains are wired to avoid uncertainty. So we make stuff up to pretend that we don’t live in an inherently uncertain and unstable world.
The bulls believe we are going higher because of a, b, and c. The bears think we are definitely going lower because of x, y, and z.
The truth is that no one knows. Probability tells you that if stocks do break higher, you still have to be cautious. Being weeks away from the longest bull run ever should have you looking over your shoulder (metaphorically) and wondering just how much more upside there is.
Investing is all about risk/reward. That is, how much upside potential is there versus downside risk. To make an investment, you want to make sure the upside potential is multiples of the downside risk.
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For example, if you think you can make a 20% gain on a stock, you should not accept a loss of more than say, 5-10%. From a broader market perspective — at least in the US — I feel that the upside potential is not that great compared to the downside risks.
I could be wrong about that. But I’m only human, and I can’t handle acknowledging the intrinsically uncertain and complex environment we’re in. So I have to create some narrative in which to operate.
And I can’t write to you every day saying I have no idea what’s going on!
Anyway, enough about markets for now…
New job opportunity!
Recently, I’ve been working on a plan to bring a few new investment services to you. But I need some help. There’s only so much reading and writing I can do.
I’m on the lookout for a junior analyst to help me research and write about stocks.
No formal financial analysis skills are required. I can help you with that. But I do need someone that can tell the difference between a balance sheet and a cash flow statement. So a bit of an understanding about financial statements would be helpful.
The person I’m looking for also has to be inquisitive and hungry to learn…and sceptical. The mainstream media is helpful in telling you what everyone thinks, but to believe it without question is to walk around with your eyes closed. So a dose of genuine healthy scepticism is important for this role.
As I said, I can teach you the investment process. But I can’t really teach you how to write well. So you need to have great written skills first and foremost, with a strong interest in how the stock market, the companies in it, and the world, works.
If you think this would interest you (or someone you know) please send me an email telling me why you’re the right person for the job. Please don’t send me a CV. I don’t care where you went to school or whether you have good ‘interpersonal skills’.
Send emails to email@example.com with the subject line Greg Canavan job applicant.
I hope to hear from you!
Until next week,
Editor, Crisis & Opportunity