Why I Cashed Out of the Covid-19 Rally
A gentle reminder to Wall Street: There is in fact a pandemic.
What’s wrong with this picture?
Photographer: BRYAN R. SMITH/AFPAn investment strategy of “Don’t just do something, sit there” has served me well over the years. So it was with some trepidation that I set it aside: As of Friday, alarmed by the recent surge of stock prices, I’m all cash.
It’s clear, of course, that stock values in the aggregate are only weakly and unpredictably tethered to facts about the economy. History shows they’re capable of departing from reality for impressively long periods. In terms of the fundamentals, former Federal Reserve Chairman Alan Greenspan had good reason to complain of “irrational exuberance” in the U.S. stock market at the end of 1996. Over the next three years the S&P 500 doubled before finally collapsing in 2000. At its lowest point in 2003 it was still higher than when Greenspan issued his warning. In 1996, “sell” was good economics but terrible investment advice.