That is the topic of my latest Bloomberg column, I know that so many of you are full of excuses. Here is one part of the column:
If we’re really headed off the cliff, selling all equities has to be better than doing nothing. Buying nonleveraged puts would be a possible Step 2, and most of the people in my Twitter feed have the smarts to figure out the mechanics. If it’s geopolitical and indeed market volatility you expect, deal in VIX options instead; VIX measures of volatility are lower than a few years ago, giving you a juicy target if you are sure volatility will rise. I get that this is somewhat hard, but if you’re right about Trump you can make a fantastic rate of return by acting on your worries. If you’re capable of getting an MBA at a good school, this learning should not be off-limits to you.
It is true that stock markets don’t typically predict “black swan”-style political catastrophes, but that is like saying sports betting markets don’t usually predict upsets. The point remains that upsets are not the norm, and if markets don’t predict them probably you should not expect them. But if you do nonetheless, go ahead and bet (or invest) accordingly.
What about the notion that market timing is a bad idea for amateurs, and how would you know when to come back into the market with your funds? That’s a fair worry, but not if you think the U.S. is headed for fascist catastrophe or rule by a KGB cabal.
I do give an answer at the end, and it is all the more worrying.
So if people have bifurcated mental modes, and their behavior is ruled so often by inertia, opposing the worst aspects of a Trump administration is going to be all the harder for most of us.
Which is all the more reason to short the market.
By now I’ve queried quite a few people, and I’ve yet to hear of anyone being short. You might argue that stock markets don’t reflect social welfare, which is fair enough. But then what market prices would you propose we look at? Consumer durables for instance are doing fine. Or is there no market discipline on your view at all?