Stocks Rolling Over: Sell Puppies, Buy Dogs $SPX $SPY

Wed Mar 23, 2016 1:59pm EST 4

It’s National Puppy Day!

Pause to coo…

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Every good-hearted person loves puppies. They don’t have a choice. According to real scientific evidence people and dogs evolved together. Dogs and people domesticated one another starting about 27,000 years ago. As part of the process, humans are hard-wired to see puppies the same way we see baby people. Healthy humans love babies and puppies on a chemical level. It’s not your conscious choice to make.

The magic of science has thus settled centuries of debate. The world isn’t divided into Dog People and Cat People. There are Dog People and psychopaths. If you don’t love puppies you’re a monster. That’s just fact. Whether or not you like cats is incidental.

As befits puppy day, stocks are staging a baby (dog) roll-over. With a hour to go the S&P500 is lingering around the 2045 level that marks unchanged for 2016. For those of you keeping score at home the S&P closed at 2059 on December 31, 2014. That means if you re-invested all your dividends your index fund is just about balls-on flat for 5 quarters.

You can deride market timing all you want but the hard math is this: Dollar-cost averaging into an index fund with a compound annual growth rate of 0% will leave you with a nest egg of exactly what you invested, less fees. That’s more of a suicide pact than a retirement plan.

Sell Puppies, Buy Dogs

Rather than wait to Sell in May I’m declaring victory now, today, on National Puppy Day.

I don’t trust a market that runs 14% in 6 weeks. I want to add longs when the mood is scared. Right now investors are a mix of dumb-money bulls chasing the market higher and angry bears whining about how stocks “should” be lower because of terror attacks (a notion debunked before the open yesterday morning: Brussels Attacked: Don’t Expect Market Panic).

National Dog Day is August 26. I believe the S&P500 will be relatively unchanged or lower at that point. I peeled off extra (read: levered) longs last week and am content to wait for another trip to SPX 1950 or August 26th, whichever comes first, before I leg into broad stock exposure.

The All-time highs for the S&P 500 are 4% higher. That’s my stop.

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(Note: In terms of my real-life portfolio I remain long the same retailers we’ve been discussing all year hedged with Twitter just to remind myself I’m fallible. “Sell Puppies, Buy Dogs” is largely a symbolic attempt to urge investors to be cautious while others are donning giddy pants. Entry points matter for long-term investors. That’s why I was obnoxiously Bullish a month ago and why I’m incrementally more cautious now.