Regime Change?

What investing regime are we now in?

We are transitioning away from the Central Bank stimulation regime.

What may be the new Regime?  An environment of fiscal stimulus in China, Japan and the United States.  A spending of money by governments to stimulate growth, a global reflation environment.

This is what has driven the equity markets to new highs.  My sense at this point, given the anticipatory move higher in equity prices that has already occurred, is that it is too late to buy and too early to short. 

The phase we are in is an early inflation set-up, one that will continue to expand and that will have meaningful impact on various asset classes.  What to do?  Buy Gold and Silver.  With inflation emerging, real interest rates will become negative and that will drive interest rates higher.  Short bonds and buy TIPS.  Inflation should help commodity countries, so emerging market ETFs and commodity ETFs become more attractive.  Finally, with paper currencies walking around with a target on their back as governments try to increase tax revenues by attacking the black market and the shadow economy, it may be prudent to establish a small position in Bitcoin.

The Parade

Witnessing the recent and continuing equity market climb to new heights reminds me more and more of the years of 1999 and 2000.  For me, those years were consumed by an aggressive buying of equities as I increased my initial capital in the market from a base of $250,000 to $11,500,000, entirely through price increases.  I thought it would never end and that I had become the invincible winner of selecting companies that would grow forevermore.  What I did not appreciate at that time was my ignorance of what a bear market felt like and what it could, and in my case would, do to my outsized gains.  It was a very meaningful education.

Today, I believe that education is being called upon.  Prudence is my mantra and it governs how I begin each and every day.  I do not feel this is the time to buy, the time to get on the bandwagon for a ride to glory.  It feels more like the time to reap the rewards that have emerged and to watch the parade from the sidewalk for awhile.  It is an interesting view.