I recently called up my stockbroker, precisely one day before the FOMC meeting that occurred on December 15th (literally today) to seek counseling. My broker, with over 30 years of experience, works for a reputable brokerage firm, and so, I trusted his advice when I asked him whether I should sell my stocks because I’m a scared little boy who has hands made of paper, and his response was;
“Buy the dip, bro.”
The question that has kept me up at night for the last year has been, is the stock market too high? The only time you should ever ask yourself this question is when you’re afraid you’ve missed the chance to buy low. Nobody wants to buy high.
To those that still haven’t bought into the stock market because they are afraid of some sort of apocalyptic market crash that will plunge the world of crypto, NFTs, and unprofitable technology companies; I understand you. I acknowledge you. And I pray for you.
Many younger, and even more experienced investors, have looked to the past for clues into how this historic bull market will pan out. Talk of the 2000 Dot-Com bubble has become rampant on social media and popular investing forums. Hundreds (even thousands) of “professional” traders are constantly sharing charts identifying “topping” patterns while perma-bears (who likely weren’t even around when the Dot-Com bubble burst) are huddling in groups, reassuring each other when their SPY put contracts expire worthlessly.
It’s almost as if the news of rate hikes were intended to bomb the stock market in its entirety and send the Dow to 30,000 points. At least, that’s what the bears wanted, or rather, expected. Instead, the Dow rallied 1%, the S&P 1.6% and the Nasdaq (how ironic) rallied 2.35%! Talk about the perma-bull activity.
It felt like a “sell the rumor, buy the news,” sort of occasion (Get the joke?)
If there is anything that the Street hates, it’s uncertainty, and the Fed’s decision, to make a decision, gave everyone, in their multimillion dollar offices on Water Street, a sigh of relief.
So, what now? Is this a bull trap? Is THIS the moment to unload on SPY $300 puts with expiration of Jan 1, 2022? Hold your horses, amigo. Let’s go back to what my stockbroker told me.
” Listen, (insert my name here), the economy is booming, and most importantly, the consumer is doing well. Interest rates may rise (which lowers overall valuations) but we still expect great earnings in the fourth quarter, therefore, strengthening the underlying businesses. Markets can overreact, as they usually do, but long-term, we expect the conditions of the economy, and the corporations that make it up, to improve. Buy the dip, bro.”
Suddenly, I awoke from my perma-bear slumber.
To further encourage you to reach a state of Nirvana, here are some wise words from a legendary investor that you may be a perverted fan of:
“For some time, stocks have been rising at rather rapid rates (while) corporate earnings have not been rising, dividends have not been increasing and it’s not to be unexpected that perhaps a correction of some of those unusual factors on the upside might occur on the downside.” -Bobby Boucher, 1962
Basically, what Mr. Boucher (the artist formerly known as Warren Buffet), was implying, was that, stocks rise on optimistic expectations, and fall on depressing reality. For as long as Wall Street sees greener pastures beyond the horizon (and greener bank accounts), the markets will continue to roar, possibly along side the inevitable tapering and rate hikes from the Fed.
Or… maybe load up on puts. #SPY300