What is at Risk?

As longtime readers can attest, John Mauldin has been one of my favorite market people to read. Here is his letter, out today, which does a good job at explaining the playing field. If one has been trying as I have during this COVID response period, to use logic and a moral compass to see the coming direction, this again is a thought provoking letter.

As we see on twitter, the Tom Lee and David Hunter types pushing the hyperbolic up-move coming in stocks, you can see how the risks are mounting. My attempt at forecasting a complex setup, like the Long Dollar, short everything else scenario is a concept that bears watching and approaching it as we mentioned yesterday on a construction basis of 9 different factors has merit, I believe. However at the moment as risks skyrocket in stocks maybe just an outright position in triple short stock ETF’s is the easiest and least frustrating way to play the game. If Lee and Hunter are correct on a 10 to 20 % upmove in stocks now, that only means (due to the 3:1 leverage) a 30 to 60 percent paper loss in your portfolio, right before a 240 percent gain in a crash. However, we all know that neither one will more than likely be able to tell us when the top is in.

Anyway, here is Mauldin’s letter for this week:

Ubiquity, Complexity, and Sandpiles – Mauldin Economics

This week I will be watching from a vacation spot. My short ETF stock position is in place.

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