It’s all starting to feel like very familiar territory now…

Nothing financially bad can ever happen again. The stock market feels nice and cozy. People keep making money. What’s not to like when asset prices can only go one way?

This is what it felt like in March 2000 before dotcoms pivoted south. It was what it felt like in October 2007 before the S&P flipped.

And that’s what has me a little concerned. The warning signs are starting to pile up.

no fear here

The Bloomberg headline said it all: “Retail Investors Just Take a Historic Step Into US Stocks.”

TD Ameritrade’s proprietary measure of investor sentiment, culled from analysis of trading activity and client accounts, hit an all-time high, the “largest single-month increase in history,” and chief strategist at The brokerage market took note with this understatement: “The retail investor has become a bit more of a believer.”

Another sign appeared on CNBC a few weeks ago with the headline “There is no fear here.” An E-Trade survey of its clients hit a bullish extreme, with a record 71% of its high-net-worth individuals (those with $1 million or more in their accounts) expecting the fourth quarter to end higher than expected. started. Clearly, the expectation among them is to continue to make money by being long in the market.

What about the so-called “smart money”?

They are taking money off the table and sounding the alarm:

• Bank of America Merrill Lynch recently said in a bearish warning note: “Investors no longer fear risk, they love it.”
• Carl Icahn stated, “I really think that, even though the earnings are going to be very good… I think this has gotten into a state of euphoria.”
• Goldman Sachs notes that valuations in almost every market class are at their highest level in 117 years.

On top of all that, the stock market experienced something on December 4 that it hadn’t seen in many, many months: an old-fashioned trading session.

The “pop” was at the beginning of the trading session. All major indices, including the S&P 500, opened sharply higher on new all-time intraday records.

The “crash” began 15 minutes after the opening bell, with a high-volume crash that persisted throughout the day, until the end of the session.

The point is, it’s not a bad idea to take some proverbial money off the table, at least.

This trade hasn’t worked in a long time. But given the current extremes, in my opinion, you have a good chance of making money now.