After my weekend review, I have nothing significant to add to the last few outlooks. In the normal course, the market is due for a minor pullback early this week. Otherwise, the market is internally healthy – certainly the best it has been since the March lows. But valuations in many quarters continue to be lofty and bullish sentiment is at a short-term extreme. Perhaps the frothy sentiment can be tamed with a few days of profit-taking. We shall see.

But what bothers me the most at this moment is the market’s vulnerability to an exogenous event. When the market is touching the clouds, it is susceptible to bad news and an associated liquidation event. With the kind of leverage out there right now, any such event could be doubly brutal.  

There is a crisis looming about the election results – and it will soon come to a head. This could lead to a black swan event for the country and the markets. It would be very naive to underestimate the powder keg that may be about to blow. The powers that be need to do whatever it takes to verify the results and give the election legitimacy. Absent that, I am very concerned about where we are headed over the next few months.

I wrote four more paragraphs here but decided to delete them. It was cathartic to write them, but I fell back on my rule that politics has a limited role on these pages. Politics are only relevant here to the extent that the disputed election could impact the markets – if a constitutional crisis results.

I relaxed a bit this weekend, as it may be the last calm weekend before the storm. I hope I am wrong, but I am comfortable in the stock market bleacher seats for now. I don’t need to be playing on the field.

Absent anything significant, I am still on vacation until early January. So my next report will be in a week. I am vacationing in the remote mountains – satellite dish on, generator fueled, guns loaded, a couple of months worth of food and water, etc. etc. 

Be careful!