Stocks?..take profits & insist on value

By the most accurate gauges of valuation for the stock market, it is 20% to 25 % overvalued. There are many quality stocks that are popular and heavily recommended but unfortunately too many of them are now exceptionally overvalued.

In the past (1980’s and 1990’s) many major New York brokerages would at times suggest that the market was “ahead of itself” and a correction should be expected. And during declines it would be suggested that it was a “healthy correction” that was needed. Both theories were correct and were constructive. The corrections in reality offer investors opportunities to “buy on sale.”

Yet, in recent years, the brokerage industry cannot afford periods of low volume. So continuous recommendations, well after large price increases have already occurred, annuities, bond funds, day trading enticements etc. are employed to bring in the needed revenue to pay in too many cases inaccurate and untalented analysts. The bottom line is that the major brokerage industry needs the public to be investing regularly and be near fully invested.

By the way, be aware that the Central Banks are often the largest investors in the stock market today. While we cannot prove it, we have been told time and again that the Federal Reserve Bank is in the stock market as a buyer offering support regularly. What the Fed does recognize and correctly is that a bear market would be disastrous for all. So yes, the market is rigged!

Today we find the markets (but certainly not all stocks or sectors) at price levels that when a decline or bear market occurs will create havoc in the markets. When the stock market has traded at these valuation levels in the past, what followed was a murderous bear market. We always and continuously advise that after major moves up, profits are taken off the table. Only limited percentages of profits can be easily taken as pro traders and non taxed institutions generally do sell long before the public.

                                                                            Conclusion?

We  feel that some profits should be taken and again remind readers that of the many investment services that we follow, the one with the best track record for the last twenty years is advising its clients to be only  35% invested in U.S stocks. We could not agree more.

Again we remind readers that the last five weeks has seen the largest dollar amount of officers/directors insider selling of their own shares (where they work) that we have ever seen. The total value of all the stocks sold has totaled over $2.5 Billion-just within five weeks! Note that total “buys” were equal in dollar value to approximately 8% of all the sales.

*We should point out that the gold and mining stocks have not had heavy selling but have seen consistent buying during their bear market.*