So what do you think of the market? Why are both actual and implied volatility so low? Why are the moves so small, but predominantly up? Is this the closest impression of the Chinese Water Torture that a stock market can pull-off?

Why doesn’t the market care about external and internal risks? Doesn’t it know that we have divisive, seemingly incompetent President who looks like he doesn’t know how to do much more than poke people in the eyes, figuratively? Doesn’t it know that we have a divided, incompetent Congress that can’t get anything of significance done?

Picture Credit: Roadsidepictures from The Little Engine That Could By Watty Piper, Illustrated By George & Doris Hauman | That said, for every one that COULD, at least two COULDN’T

Leaving aside the possibility of a war that we blunder into (look at history), what if the inability of Washington DC to do anything is a plus? Government on autopilot for four years, maybe eight if we decide we are better of without change — is that a plus or minus? Just ignore the noise, Trump, other politicians, media… ahh, the quiet could be nice.

Then think about Baby Boomers showing up late for retirement, and wondering what they are going to do. Then think about their surrogates, the few who still have defined benefit pension plans. What are they going to do? Say that the rate that they are targeting for investment earnings is 7%/year forever. Even if my model for investment returns is wrong in a pessimistic way — i.e., my 4% nominal should be 6%/year nominal, you still can’t hit your funding target. As for those with defined contribution plans, when you are way behind, even contributing more won’t do much unless investment earnings provide some oomph.

I am personally not a fan of TINA — “there is no alternative” to stocks in the market, but I recognize the power of the idea with some.It is my opinion that more people and their agents will run above average risks in order to try to hit an unlikely target rather than lock in a loss versus what is planned. Most will “muddle in the middle” taking some risk even with a high market, and realizing that they aren’t going to get there, but maybe a late retirement is better than none.