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Trick
October 2018
Red Sky
September 2018
Trick
Or treat? This October, like some past Octobers, has offered up a market correction. The major indexes are down about 10%, with small caps and some of the large tech leaders down more than 10%. Recent darlings, such as Amazon and Netflix, are down about 20% and 30%, respectively. We really shouldn’t be surprised when stocks with P/E’s of 50 to 100 and year-to-date returns of 50% to 100% undergo a correction.
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Red sky at night, sailors delight; red sky at morning, sailors take warning. This is a common phrase that actually has its roots in the Book of Matthew in the New Testament. Shakespeare also used it in one of his plays. This saying seems to indicate that the exact same observed condition could have different meanings depending on the timing of the observation or one’s point of view. In the markets, there are always different camps of people with different interpretations of the current situation, sometimes leading to vastly different views of the future. Both sides are usually most vocal at market highs and lows, and we are at a market high right now.
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