By Malcolm Stacey | Saturday 18 March 2017
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Hello Share Tusslers. The majority of private shareholders at the UK Investor Show at Westminster in a couple of weeks’ time will be sitting on huge gains over the year. They will be in a jollier mood than we’ve seen them in a long time.
The Footsie is charging ahead, now breaking all-time highs. As usual, the rest of the bunch are (mostly) lolloping along in the wake.
But raging optimist though I usually am, even I am beginning to think this is getting dangerous., I rather think I should go into cash now, at least partly so. Let me remind you gang, what happened in the Wall Street crash of 1929. It won’t help you to sleep at night.
In the summer of that year, the New York Times said shares had reached ‘what looks like a permanently high plateau.’ Note the reckless word: ‘permanently’.
On October 24, fewer than two months later, shares dropped by 11%. On Monday, they were down another 13%. The Dow toppled another 12% the day afterwards. The slide continued till Summer 1932, by which time New York registered companies had lost nine tenths of their value.
Could it happen here? Well, we’d like to think that traders are a lot more sophisticated now. But look what happened in 2008. That was another major disaster which took the experts by surprise. Our banks have still not still recovered from that unforeseen catastrophe - and probably never will.
As Uncle Tom constantly reminds us, PE ratios are generally too high and so is company debt. Personal credit is growing fast, and we are told wages are nowhere near as high as inflation.
But it’s not all bad. The number of jobs is an all-time record and so income tax, vat, fuel tax and capital gains tax etc will all grow.
So we should not be heading for another Wall Street crash, after all. Except that… shares were heavily over valued just before New York blew up. And Big Donald plans to slap trade tariffs on Mexico and China. What if all other countries think this is a good idea? We can forget about any bull markets then.
So do we go into cash now - or risk plugging on with our shares a bit longer?
I’m going to ask them in the Punter’s Return And get some better advice later - at the big UK Investor Show on April 1st. God bless.
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