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How the Market Works

The Discipline of Taking Profits

Posted by kdadmin on February 26th, 2015.

With several market indexes hitting record highs on Tuesday, many up over three percent since January 1st, the midcap sector up over 6.5% in the two months since December 17th, and the S&P up 5%, I have taken my ball and gone home.

In my December 17, Huge Fan blog post, I talked about the benefits of buying market fear. Now, I suggest having the discipline to sell market euphoria. This market upshot, especially after a nearly hysterical January, is a hallmark of excessive volatility, and not likely to be permanently sustainable. Especially considering the consensus projection for the S&P 500 in 2015 is only 3-5% total.

So, yesterday, I hedged my bets, sold off a significant part of the equity overweight I bought in December and will wait for the next buying opportunity. Maybe I’ll miss the little extra smidge of return powered by the retail traders who are late to the party, but at least I won’t be stuck cleaning up the mess …

Those of you who are my clients will receive your confirms shortly, if you haven’t already.

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