Why I sold half of everything!

I realize that I haven’t published in a very long time (although I’ve done a few articles in the recent past on seekingalpha.com).  There hasn’t really been much to talk about.  Global government stimulus has heretofore  put a floor on markets – which teeter now and then but have returned to their lofty levels every time. I’ve had the urge to sell for months, but managed to talk myself out of it (just the ‘jitters’ I told myself): So why the change of heart?

I was in Europe in October of 1987 when markets plunged.  On my return everything was on sale and fortunately (for the performance of the funds I was managing) I went on a buying binge.  Ever since, I get anxious when September and October come around.  This anxiety is peaking now, especially as I note a number of trends I find unsettling.

Interest rates at the long end of the curve have been rising.  The cost of borrowing is rising.

Corporate profits have been stellar coming off the bottom of the COVID recession, but the growth rate is about to slow down.  Supply remains constrained and P x Q (revenues) will in the short term have trouble increasing despite price increases.  Speaking of price increases, inflation is becoming worrisome for all of us.  Today’s report from the Bureau of Labor Statistics indicated the Consumer Price Index has risen 5.4% over the past 12 months.  There’s nothing inherently wrong with prices rising, as long as we can afford to pay higher prices.  This report from the Bureau also came out today:

Real average hourly earnings for all employees decreased 0.1 percent from June to July, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This result stems from an increase of 0.4 percent in average hourly earnings combined with an increase of 0.5 percent in the Consumer Price Index for All Urban Consumers (CPI-U).

You feel it, I feel it and everyone we talk to feels it – incomes are not keeping up with inflation.  Real estate and the stock markets have everyone ‘feeling’ wealthier, until they don’t.

All market pundits seem to be bearish and if history is any guide, September/October may prove they’re right this time.  Why sell only half?  If I’m right then I can buy it all back cheaper; if I’m wrong at least I can collect some dividends.