Financial Update

Over the course of last week, I moved most of my clients assets around. For the last 6 months, I have been trying to prepare for this. As some of you have known, I have been waiting for this monstrous rally since October. While it occurred a couple months later than I thought, it nonetheless has been fast and strikingly strong (roughly 35-40% in just over 2 months). Furthermore, I thought that once this rally peetered out, we could find ourselves in the midst of another major leg down. Whether this rally is done or not is yet to be seen, but we are very close to where I thought we would get to (the 200 day moving averages or between 9000-10000 on the Dow Jones). As a result, I have started to get very nervous. I am officially in my uber-conservative portfolio preparing for a potential major downswing. I believe the current risk/reward in the markets is horrible (meaning the upside potential from here is dwarfed by the downside).

Despite my feelings, I have told my clients we could continue to be in an up market maybe even two more years simply due to the massive stimulus the government has supplied. However because I feel this stimulus is nothing more than a short-term jolt (with probably zero potential for long-term GDP growth), once the money runs dry we will be in an even worse position than before. Higher debt levels and higher interest rates will likely be the case. At the point this occurs and the market rolls over, watch out! It could be in the next few weeks or a couple years out. I truly feel the only way we will not go far lower from here in the markets is if the fed allows inflation to run rampant. This will help stocks go up (because earnings will be higher due to the cheapening dollar), but with inflation super high everyone's purchasing power will likely drop substantialy. While the markets will look different under the two scenarios, the end result will be relatively the same. Most people will be far worse off at the end.

My odds:

We don't drop significantly lower from here: 20%
We retest the March lows (mid 6000s on the Dow) within the next 2 years, but they hold: 35%
We break down through the March lows within the next couple years: 45%