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Southpark And The Stock Market

A bull market is a lot like the character Kenny on Southpark. Just as you can be fairly sure that Kenny will die by the end of the episode (at least the early ones) you can also be fairly sure that a bull market will come to an end. That is probably the case with the current bull market,even though (or more accurately, because) it has been going on for years now.

But another way that the stock market is like Southpark is that it is not perfectly predictable. Kenny didn't die in every episode. The Mr. Hankey episode is most famous for talking poo, but it is also the first episode in which Kenny didn't die. He had close calls, though. He unplugs Christmas lights that are near dripping water, and another time he climbs a ladder that is right next to a shark tank. Both times you think "this is it, he is going to die", but he doesn't. He lives to the end of the episode.

The current bull market makes me think of that episode. It has had all kinds of close calls, ranging from a slump in the housing market to concerns about interest rates and come out ahead. It has not only come out ahead, but today it reached a record high and showed the highest gains in 4 years. It is climbing a classic wall of worry, just as Kenny did in the Mr.Hankey episode.

I'd like to say I have recognized this wall of worry for what it is and charged fearlessly ahead and enjoyed great profits, but that's not the case. I've been hedging a bit. I have bought ETFs that bet against the stock market (SDS, which shorts the S&P 500) and against the dollar (FXB, which holds British pounds). Both of those were down today, and as a result I underperformed the market with a gain of only 1.13% ,which is lower than any of the major indices.

I computed the gains my portfolio would have had without the hedges. It came out to 2.52%, which is better than any of the indices. This made me feel both stupid and smart. Stupid because I would have done better if I hadn't hedged, and smart because it indicates I'm still good at picking stocks. (Although "chicken" might be better than stupid).

Speaking of chicken, there was another episode of Southpark where Kenny narrowly escaped death several times, but really did end up dying at the end. It was the Chickenlover episode. It's entirely possible that the market will end up like  Kenny did in that episode instead of the Mr. Hankey episode, and then I will be glad that I was risk averse. Time will tell.

I learn so much from Southpark.