March 31, 2020.
I received more feedback after yesterday’s narrative than any other one I have written. There were many comments and the number one question was – Is there anything that can be done, in the market, to make money? – or another way of putting it – Does any trade make sense right now?
I am not a licensed advisor and I have no benefit personally from what I am writing – you could make or lose money
but here are my thoughts….
The Fed is flooding money into the market to save the economy. There is no limit to the amount of money that will be printed to create liquidity and prevent deflation. If they are successful the market will fully recover and the bull market run will continue.
The stock market is a future prediction of where the economy is
heading (generally) in 6 months. The market seems to be betting on
recovery and I just don’t know. If an investor bought a Dow or Nasdaq
index fund it has already moved up considerably since its lows so the
opportunity is missed. However, if you want to “play” the market more
conservatively then a good strategy is to buy an oil index fund that
moves up as the price of oil moves up. Oil is close to an 18 year low
and it could certainly move lower but I believe the risk/reward scenario
makes sense at this price. Therefore, if you believe we will recover
and wish to make a more conservative bet – then a bet on oil, I believe,
has limited downside and if the economy improves in the coming months
it is highly likely to see much higher oil prices – and your investment
has done extremely well
(with, likely, large double digit gains).
Again the risk/reward scenario with oil makes sense to me because “the bad news is priced in” and it has not yet moved upward like the general stock market from its lows.
REMEMBER THERE IS ALWAYS RISK AND YOU COULD LOSE MONEY.
DON’T GIVE ME PRAISE IF YOU MAKE MONEY ON THIS – AND DON’T BLAME ME IF YOU LOSE MONEY ON THIS.
SET A 20% STOP LOSS OR WHATEVER YOU ARE PREPARED TO LOSE.
For full disclosure, for reasons members are well aware of – I don’t have a brokerage account and, although this certainly is a trade I would do, my personal situation does not allow me.