What is the impact of Brexit on Chicken Little's view of the financial world?
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| Kiss Goodbye? |
The answer is Brexit changes nothing for Chicken Little.
When you are terrified, it is hard to get more terrified. Here is a summary of Chicken Little's current thinking.
Global Monetary Experiment
Is is possible to get rich by printing money? The obvious answer is no. Everyone knows this except for the world's Central Bankers.
According to one report, in order to open a coffee business in Athens, a business person has to acquire 27 different permits, and it takes about two years before the first legal sale of a cup of coffee. The obvious solution to Greek economic woes is to make it easier to do business. The European Union's solution to economic trouble, however, continues to be more issuing more debt and printing money.
"You better cut the pizza in four pieces because I'm not hungry enough to eat six." - Yogi Berra.
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| Printing money makes each slice smaller |
Monetary policy cannot make us richer, just as the pizza size is not changed by the number of slices.
Time to sell US Stocks?
Is it time to sell all your US stocks and hide in the financial bombshelter with Chicken Little? For most people, the answer continues to be no.
If the world is ending, why not sell all US stocks today?
The answer is that you might be able to wait for a clearer signal to sell. Financial markets exhibit momentum -- markets going up tend to continue up, and those going down tend to continue down. Momentum indicators for the US stock market are mixed. It is not clear whether we are in a bear market or in a pause in a bull market. (See Chicken Little criteria for becoming bullish.)
If the world is ending, why not sell all US stocks today?
The answer is that you might be able to wait for a clearer signal to sell. Financial markets exhibit momentum -- markets going up tend to continue up, and those going down tend to continue down. Momentum indicators for the US stock market are mixed. It is not clear whether we are in a bear market or in a pause in a bull market. (See Chicken Little criteria for becoming bullish.)
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| Time to build the Bomb Shelter? |
Is it time to build the bomb shelter? Yes, but it is too early to move in.
Chicken Little's Advice
Chicken Little continues to believe that most people have too much money invested in risky financial assets. My advice is to be crafty in your approach to selling a small amount of stock, and be ready to sell more if the US stock market declines further.
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| Be on the lookout for a Bear Market |
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