"Do you sell at record highs?" by: John Sample

   The year began with a bang setting new record highs for the averages and indexes. 
   I would say that I see more good news on the horizon. 
   After presidential elections there often is a rise in the stock market as optimism is high. 
   I would think this trend certainly could happen this time, but I have a problem with the longer term horizon. 
   There will be more spending to assist those economically distressed due to the pandemic. We have spent trillions of dollars to date and will spend more. 
   We will raise taxes to pay for these expenditures, but I doubt the national debt will be reduced. There also is a building opinion the Federal Reserve will raise interest rates that will increase the cost of repaying the debt. 
   At least if interest rates go up they will still be historically low. 
   My concern is whether raising rates will put the brakes on the economy.
   We have a robust economy trying to adapt to the new way of doing things. 
   Despite the road blocks the pandemic has caused, capitalism adapted on the fly. 
   There has been damage and many haven’t recovered. We cannot sustain an economy with far too many people unemployed. Property owners will have to get paid rent and utilities must be paid. 
   State governments clamor for financial assistance. There is only so far you can go to get help. Nothing is free, as is the case for the vaccines. We will pay through increased taxes. That’s reality.
   My thoughts are on how all of this will impact the stock market in the next six to nine months. 
   It’s hard to believe that we will not have to go through a bear market and not just a correction. 
   The last bear market took 10 years to erase. We have a real bubble to deal with. 
   I call it a bubble as I don’t see the earnings supporting the prices paid for stocks. That is not to say that companies are not making a profit. 
   Look at the FANG stock earnings reports to witness the billions being earned each quarter. Moreover, they are projecting future earnings growth. 
   The problem is that prices have far outrun a reasonable multiple. When stocks start trading at 30-plus earnings we are way out over our skis. 
   I will repeat myself and suggest that should you have gains, possibly take a portion off the table. I am not suggesting to sell out, but to put some back into your pocket. 
   It is not a great leap to suggest that we will experience a bear market in the near future. 
   It is only the basic concept of averages, if, for no other reason, than it is way past time. 
   You put all the other current factors on top and it really makes it hard to believe differently.
   Take heart that should it happen, as it did in 2000 and 2008, the markets will recover. 
   We have a vibrant economy that will overcome as free enterprise always overcomes setbacks.

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