[quote=ltsdd]
Today’s stocks market reminds me of the dot com and housing bubbles where the mantra is “buy high, sell higher”.[/quote]
Unfortunately, correctly spotting bubble does not make anyone a single cent richer than he otherwise would be.
Hence this is a discussion of the trading strategy under the current valuation (which we all know is high, albeit supported by low interest rates). The problem that we faced is that there is no reason for the stock market to tank NOW just because the valuation is high. The history taught us again and again on that (although the higher it becomes, the more likely it will tank due to gravity)
Here are a few possible strategies:
1. All-in now. This is what kev374 decides to do. It feels risky but it was risky for the last couple years and it has kept climbing. Who said it won’t climb more? The drawback is that if it indeed tanks, you are out of bullets to buy more at lower price when the dotcom busts kicks in.
2. Take money off the table. But you will be punished if your timing call is wrong. This is the strategy a lot piggs have employed in the last few years with dismal outcomes so far.
3. Underweight stocks but use a small percentage of the cash to buy high growth potential. This is basically what ltsdd is doing. 2 shares of gbtc but some money off the table.
I find the last trading strategy interesting. So if the stocks keep climbing, because you are invested in “hot” stocks, they will climb more therefore even though you underweight stocks, your outcome may not be bad at all. But if it tanks, you only lose a tiny amount of money set aside for speculation and you reserved the cash to buy at the bottom. The drawback, if the dotcom bubbles is any guide, the tech stock tanks earlier during the bust when S&P formed the head & shoulder pattern.
The best trading strategy of course is to all-in but to find early warning signal to get out, but I don’t know if anyone knows a good early warning signal, but the performance of high growth tech stock did decline full 6 months earlier than the S&P 500 in the last bubble.
That’s why I felt bitcoin bubble very interesting. That may be exactly the form of earlier warning signs that we need to form the best trading strategy under the current market condition.
