Muh Muh Muh My Corona (virus)

The pluses of not messing with equities right now:

If you are invested in equities, valuations are broadly disconnected from anything fundamental. In a market not being manipulated by central banks, earnings, which are a function of the broader economy, would drive stock prices. Earnings were already declining for several years prior to the pandemic, but stock prices were rising, because the Fed (and ECB and BOJ) were relentlessly expanding the money supply and buying debt with it. That has created a lot of leverage that has blown bubbles in risky things. Earnings are falling off a cliff, stock prices have been moving higher, which means that the multiple of price to earnings has been expanding. That multiple expansion has taken what was already an insanely valued stock market and turned it into a complete farce. It is going to come to an end -- with a spectacular crash. So the reason to park yourself in cash would be to just not mess around with it.

The cons of trying to market time:

The Fed might be able to blow the bubble even bigger than this -- and if you are going to get all aggravated sitting on the sideline and feel like you are missing out (FOMO -- fear of missing out, which is what is driving the market -- it may be a miserable time for you that can go on way longer than seems possible). This bubble didn't just pop up post pandemic. The Fed caused the financial crisis in 2007/08 by making money too cheap for too long and that created a lot of debt. We neeeded a deleveraging -- credit defaults and allowing the price of money to be set by a market rather than some price czars -- but we never got it. They answered a self-created debt crisis, by stepping in to destroy price discovery in the debt markets even more (by creating money out of thin air and using it to buy up more debt, which in turn keeps yields artificially low), in order to allow overly indebted entities to hold off the reckoning (their defaults) with. ... MORE debt. And that created an even bigger debt mess. The longer it goes on -- and this is playing out over years, the worse they are making the future. They have robbed us of decades of growth at this point.

Now, they are trapped. Interest rates can never normalize now, because if a market and price discovery were at work, the amount of debt they have enabled is a huge problem now -- just servicing it if rates weren't being manipulated to make money cheaper than free, would create massive defaults and the economic shitstorm that is going to come with that -- there are trillions of dollars of defaults that are going to have to happen. It is going to rob us of years upon years of the future -- they robbed that future to live a fantasy for years.

So basically, market participants are now betting that the Fed is all in -- it's not really much of a bet, the Fed's behavior has made it clear that it knows it is trapped and they are going to go all in at this point. They will monetize as much debt as necessary to prop up the mess they have made, and that added debt is serving no productive economic purpose. They have basically been reduced to flooding the casino they created with chips. And that is why speculators are going to ride it until the end, hoping they can get out before the crash -- whenever it happens. And who knows how high risk assets can go -- how big a farce can they create?

The other major con about trying to time the market is that if you are talking about a 401(K), what has been your plan all along? If the idea is that you had a fairly long time horizon and you were going to dollar cost average in (buying little bits every month), you should barely be looking at that money if you are say, 10 years or more away from retirement. Stay the course, and don't try to time the market. Because that is usually a recipe for failure. So for most people -- who are investors, not traders -- it might make most sense to just ride it out (as long as your time horizon is long enough). Individual investors tend to sell at the wrong time and buy at the worst time, so for most people, they really shouldn't look at their 401(K) except once a quarter or so, and that should only be to rebalance to get your mix of assets in line with the asset allocation mix you set for yourself.