Money is pouring into stocks, particularly financials right now, Central Banks are buying US equities, oil is set on fire and the stocks, especially the leaders held up strong in the face of metals like Copper and Gold and Silver tanking yesterday.
Well the market also gets pushed further into risk with the low yields, the Soverign Debt Defaults and “not actually a default” ruling and the people starting to realize their CDS are as about as worthless as the subprime derivatives and negative real yields make bonds not so great.
All the money sitting around gets pushed into stocks, parked into real estate, and sheltered overseas away from the money squanderers in government in the west, and instead into the benefactors. Well US companies benefit from cheap labor overseas, entitlement spending at home and stimulus to the consumers, devaluation of individual wages and many of the american companies are expanding globally to markets that benefit from the spending and exporting of the capital via debt interest payments to creditor nations. Oh certainly bonds outperformed in the last 30 years but following a 30 year trend, 30 years into it is insanity. Don’t get me wrong, the “risk off” trade is still to US dollars and bonds, and so some TLT position to take advantage of the “risk off trade” is perfectly fine, but I certainly wouldn’t want to be reaching for yield at this low levels. I understand some older people need income for retiring, but I would still rather put a significant amount of my money in high yielding stocks t this period of time. You do not want to follow the trend of baby boomers moving to bonds because it will not last. The yields are near or at long term extremes. Compare stocks to bonds and stocks are for the first time in a very long time, finally at least reasonably priced relative to bonds. Relative to real estate bonds are just barely at what I would consider extremes as well.
I believe that is the long term trend that we have in store for us but lets be honest, even with all that going on, how can appl continue to act like it is a small company that just smashed earnings by 100% and is just starting to get recognized by institutional investors every single day? It’s not that it isn’t undervalued but how often do stocks go straight up in the air indefinitely that are already $500 Billion dollar companies?
Although I refuse to put a large % of my overall cash into this nonsense until we get a meaningful correction, that does not prohibit me from occasionally getting aggresive via OTM calls. And the Financials are breaking out, or BTFO as RC likes to say.
I will have the rest of the March Trend Report Up in a few days, for now just some minor observations and highlights.Comments »