The sky is falling … [but I’m not short]

With the Dow and other indices at record levels, there is no shortage of pundits out there warning of an impending correction, or worse. See, for example, http://money.cnn.com/2016/04/15/investing/stock-market-donald-trump-ted-cruz/ and http://thesovereigninvestor.com/exclusives/80-stock-market-crash-to-strike-in-2016/ .

Some of the fear mongers, unfortunately, have an ulterior motive for predicting doom and gloom. A number of advisers look at such predictions as free options – if there is a crash, they can sagely point to their warnings and say, “See, I called it.” Some can even monetize their call… raising funds as investors look to re-allocate their decimated portfolios to stem the bleeding. If there is no crash, well, no one will look back and call them out on their incorrect call.

To me, the real question is whether these prognosticators have their money where their mouth is. If they think a major crash is coming, are they short? Or at least in cash? If not, I find their warnings have little credibility. They might be right, they might be wrong – either way, they’re not betting their own money on the call.

As the famous saying from Paul Samuelson goes, Economists (using technical indicators), “predicted nine of the last five recessions.” It wouldn’t surprise me if unscrupulous financial advisers and nay-saying pundits predicted ninety.

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