By Samuel Taube
Next September will mark the ten-year anniversary of the collapse of Lehman Brothers – the unofficial beginning of the Great Recession.
Ten years is a long time between recessions – especially when you consider that, since 1945, the average economic cycle has lasted only 5 1/2 years.
As this week’s chart illustrates, our stock market valuations are starting to look frothier than a cappuccino.
The chart shows the rapid post-recession rise in the “Buffett Indicator.” That’s the ratio of U.S. stock market capitalization to U.S. gross domestic product.
According to the “Oracle of Omaha” – aka Warren Buffett – investors should be wary when our stock market is larger than our economy. And today, the capitalization of the Wilshire 5000 is roughly 134% of our country’s GDP.
So maybe this bull market is closer to the grave than the cradle. But panicking and going to cash is not the right move.
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Six Steps to Sure Up Your Portfolio
As Chief Investment Strategist Alexander Green recently wrote, there are a few simple steps you can take to minimize your risk in a late-stage bull market like this one…
Rebalance your portfolio.
Make your asset allocation more conservative.
Favor large caps over small caps and value stocks over growth stocks.
Favor dividend payers over nondividend payers.
Diversify globally.
Use trailing stops.
These strategies won’t just minimize your losses during bad times. They’ll also maximize your gains during good times. That’s important because although this bull market is getting old, it’s not dead yet.
Alex’s Oxford Communiqué subscribers are taking many of these steps already. His detailed recommendations are perfectly suited for these times.
What’s more, subscribers get access to a controversial report from an ex-IRS agent – one that’s chock-full of hidden rebates, obscure deductions and other loopholes in our Byzantine tax system. To learn more, click here.
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Source:: Investment You
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