First with Financial Comment from Arabia

For the Road Runner read the market professionals of Wall Street. And for Wile E. Coyote the majority of investors and the entire general public. So how close is the Coyote to the edge of the precipice right now?

You could almost ask any professional investment banker and get the same opinion. The 12-month stock market rally is too long and too strong not to undergo a meaningful correction or even a major crash.

One problem is that as the Coyote finds out when you get to a very high place there is only one way to go. Gravity is a force that cannot be resisted.

Markets also act like the mischievous Road Runner and lead investors up the mountain only to watch them drop off the edge of the cliff. The professionals collect their commissions as you buy into the market, and they collect commissions as you sell out.

It is such an old cycle you would have thought that investors would have learned by now. As children we all used to watch the Road Runner lure the dimwitted Coyote to the top of the mountain and shout out warnings at the television.

He never paid any attention, or learnt anything, and always fell to the bottom. He always then picked himself up and got ready to do the same thing again.

In real life we are not cartoon characters and those who risk their wealth at the top of a bear market rally will not have their capital returned. It is gone. Only the market professionals and short sellers win out.

After a stock market event there are always stories about a few hedge fund managers who went short just at the right moment. It is a bit like bribing the Road Runner to help you back down the mountain and keeping yourself intact. And actually real life is rather better for the shorts who actually make a lot of money out of crashes.

There are plenty of articles on this website explaining how to go short in ETFs which anybody with an Internet stock market account can do easily. Arabianmoney has been too early in going short. But don’t end up like the Coyote! And certainly do not stop out your shorts now!