2017 has passed. It turned out to be another good year for stocks. This portfolio continues to deliver although there are few dogs. The biggest event of 2017 is tax reform. Potentially it has greate impact on business (hopefully the good way). But it is likely to cause treasury yield to go up, $ to depress, debts to move up. If energy price continues to move up (for example to $80 which is unlikely), then it will have negative impact to some stocks and market. If yield continues to go up (for example, over 3.5% which is also unlikely), it will have negative impact to some stocks and market. At this point, asset prices are expensive. It is hard to predict what will happen in 2018. However, I think we probably still need to hold stocks through the year because more debts governments around world (espicially China) will need to pile up. Real interest rate continues to be low. Cash on companies balance sheet continue to remain high.
I prefer not to short the market when bull trend is still very strong. Rather, buying protection is ideal (when VIX remains low, many times through 2017 protection was rather cheap). With a bit of hedge plus protection, we can continue to hold on to our holdings and enjoy the bull market a bit longer without losing sleep at night.
Happy New Year!
