The Line Goes Up (the Creek without a paddle)

Investing in the market is tricky right now. Euphoria is mainstream.

Artificial intelligence (AI) has become the biggest market force we’ve seen since the dot-com craze. Stocks are flying.

Even if you want to guard against it, the world of passive investing is bringing everyone along for the ride.

As they say, if you’re ‘up the creek without a paddle,’ you’re screwed.

Every week brings fresh headlines that send stocks through the roof. Miss out on this wave, and you feel like you’re being left behind.

After all, FOMO (fear of missing out) is a powerful emotional tug.

Just ask legendary investor Stanley Druckenmiller. After patiently sitting on the sidelines in the late 2000s, he lost US$3 billion in just six weeks by caving in and chasing the end of Dot-com bubble.

History teaches us one thing: you can ride the current, but you damn well better have a paddle.

In investment speak, that paddle is knowing when to get out, a plan that lets you stay in the game while covering your ass if things go sideways. More on that at soon.

Why do I think you need a plan right now?

Red Flags Are Flying

The recent headlines are absolutely wild. Nvidia just committed to throwing US$100 billion at OpenAI over the next few years.

Sounds like a power move between two AI heavyweights, right? Look closer and it gets messy. OpenAI’s going to turn around and spend that cash (and more) buying Nvidia’s chips.

It’s basically a financial merry-go-round. Nvidia writes the check, OpenAI cashes it and buys their chips, and Wall Street cheers both companies for being ‘visionary’.

Nvidia’s market cap jumped US$169 billion on this news. That’s bigger than most countries’ entire economies.

This isn’t just Nvidia and OpenAI. Oracle (that boring old database company) saw its stock price rocket when OpenAI promised to drop US$300 billion on cloud services over ten years.

Never mind that OpenAI only pulls in about US$12 billion annually. Investors acted like this was money in the bank.

We’ve been here before. In the Late ’90s telco-hardware providers were running this same vendor financing scheme.

Lend money to dot-com startups so those same startups could buy their products. Kept the party going beautifully…until it crashed spectacularly.

Cisco has always been the prime example. At the Dot-com peak, its valuation was 5.5% of America’s annual GDP.

Today, Nvidia’s value is almost three times larger at 15.2% of US gross domestic product.

Source: Generated using Claude.ai with BEA data

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Circular corporate spending aside, governments are also throwing gasoline on this fire.

Trump’s second term has been a cacophony of news. But beyond the noise is an administration that is very bullish for the stock market.

Slash taxes, facilitate megacap tech build-outs, and lean on the Fed to cut rates.

The market received the message loud and clear. Bank of America says more than US$68 billion flooded into global stocks just last week.

That’s the biggest rush since late 2024. The market’s only got one thought: Washington and the Fed won’t let either the economy or stock prices tank.

‘The line goes up’…

So what’s a better strategy than getting out right now?

Accept you’re in the rapids, but make sure you’re not helpless if it turns into a waterfall.

Exit Strategy

So what’s your paddle in this situation? Doesn’t need to be rocket science. The easiest tool for today’s madness is a trailing stop loss.

You’re likely already aware of this, but if you aren’t, a trailing stop loss is an automatic sell order that sits a fixed percentage below your stock’s current price.

Stock goes up, your stop follows it higher. Stock drops by that percentage, you’re automatically out.

In practice, this lets you surf the momentum wave, banking gains as prices climb, while having an ejection seat ready if momentum flips.

Say you set a 20% trailing stop on a stock that doubles. You’re guaranteed to walk away with at least 60% profit, even if the whole thing implodes overnight.

Unless there’s a gap down in prices. But let’s not dwell on that.

This removes the guesswork for anyone who doesn’t want to babysit their portfolio all day, protecting your money and sanity.

Yes, you can be shaken out of smaller corrections. But this late in the cycle, that could be better than the alternative.

I think it’s fair that we accept the reality. AI and tech are running the show right now.

And regardless of whether that future is abundance or dystopia, I would say trailing stop losses are a necessity at this stage.

They let you go with the flow, capture the upside, and still have an escape route when the market inevitably changes direction.

You might not need them on every stock you own. But when the music stops (as it always eventually does) you’ll be damn grateful you were proactive, rather than reactive.