Here we are beginning the final 2 weeks of the year.
The economy continues to limp along, improving, albeit rather slowly. “Recession fatigue” is likely to make this holiday consumption spree appreciably better than the past 2 years.
Markets have looked a bit tired — and yet — every opportunity to see big whackage has been met by liquidity driven buying. The bid beneath equities remains firm. The bias remains firmly to the upside.
With this year all but over, traders are starting to turn their attention to 2011. Corporate profits appear to be strong, but headwinds include unemployment and real estate. I continue to expect further contraction in RE prices, and my participation in the Case Shiller survey reflects that.
Rotation out of bonds is a major source buying buyer, following 18 months of main street preferences for fixed income products. It is ironic that mom and pop were Treasury buyers during what is likely to be the last gasps of a 30 year bull market in bonds.
Talk about late to the party!
History shows us that the public tends to be the last in. From the shoeshine boy in the roaring 1920s, to buyers of the Nifty-Fifty in the Sixties, then dot com stocks in the 1990s, and once again with bonds in the 2000s, main street joins Wall Street when their greed overwhelms their better sense. It is sad but don’t blame me, I am only pointing out this truth.
Don’t be surprised if the public’s rush into commodities marks that as a top, as well — including Gold.
This is a holiday shortened week — markets closed Friday for Christmas — so we could see some interesting action. The week after are little more than rookies manning the terminals, thin trading, and last minute position closings.
Around this time of year, I like to ask traders and investors the following: What is your plan for next year? What have you learned from your mistakes, what did you do right? (The 2009 Investing Mea Culpas were well received; Look for my 2010 mea culpas next month)
"Markets have looked a bit tired "” and yet "” every opportunity to see big whackage has been met by liquidity driven buying. The bid beneath equities remains firm. The bias remains firmly to the upside." _____________
Regardless of being bedridden and on life support, the obese cancer patient is losing weight. Losing weight is good. He's planning on running a marathon next year.
No changes for me. I’m still in a reasonable buy and hold mode. No, it’s not safe to hold forever. There’s not enough credit flowing or enough leverage world wide for another collapse any time soon. All sellers have already sold and only the nutsies threaten a mass of mystery sellers will arrive from the ether and give Ghost Hunters their first documented find.
Economic recovery is gaining traction. Retail is recovering and employment is recovering. Europe is taking care of itself and a lot of their problems are conceptual only. What’s ‘bad’ one week will be ‘fixed’ the next week and forgotten the next.
Bond buyers from late will be moving into stocks once the idiot advisors who told their clients about the horrors of stocks and the virtues of bonds figure out how to change their story without looking like commission whores, fad followers, or 2nd generation insurance salesmen. The ocean of cash that brought 10 year rates to fantasy lows will send stocks back to parabolic highs next year while long term rates rise to levels where real fixed income will be possible again.
Gold and oil will remain trades.Who knows where the highs for gold are. Fortunately, a 20% or 30% drop in gold will happen 1% or 2% per day. That’s plenty of wiggle room to play in gold and bail with profits. Oil will rise until it stops. Repeatedly.
I think the market will rise in a saw tooth pattern, A smart and lucky timer will goose their earnings a little by profit taking at the parabolic highs and buying back in at trend.
I suspect the next big crash will happen when the US joins the PIIGS in 5 or 10 years.
[...] This Christmas meltup has some toppyness to it. (TBP) [...]
BR,
can you point me to a good data feed that shows mom and pop were buying treasuries, it would seem that in the data I have seen it was not treasuries that they were buying but corporates, muni’s and junk. Mom and Pop were also looking for yield, iow.
BR noted:
Markets have looked a bit tired "” and yet "” every opportunity to see big whackage has been met by liquidity driven buying. The bid beneath equities remains firm. The bias remains firmly to the upside.
reply: ———– QE2 helps a bunch, too. It’s the deal closer.
last post:
Re bond buyers of late and their timing issues:
The smart bond buyers are bailing now. They understand bond math and rudimentary economics. Some might be praying for QE2 to kick in and see rates fall again. This might happen temporarily if something ancillary assists. There will not be a third drop in rates unless the world ends.
The next wave will move after they see their end of year statements. Idiot advisors will have to do their best dancing at this time. Ha Ha Ha, idiot advisors. Oh, who am I kidding? The experienced advisor knows the rubes need to be told what to think and many advisors will claim nobody could have seen this coming, or think up something even better. The rubes will quiet down and comply.
Then comes the last wave who will create the parabolic top we all want to see, possible in Spring. Woo Woo.
Bloomberg terminal. I believe its “Funds Flow” Go.
The anecdotal evidence you hear from brokers, reps and advisors is confirmed by the Fund Flows for Bonds and Equities.
(Does anyone know if there is a free or cheap service that provides this data?)
“History shows us that the public tends to be the last in.”
If it were not for these suckers. Wall Street would never profit.
Thanks BR. As a rep, I can give you more of the same anecdotal evidence you heard from other people, no retail investors want safe(r) bonds now. Even PIMCO Total Return is changing fund strategy now to include other allowable investments. Perhaps that reveals something about investor sentiments. That said, I have read a lot of reports like these for over six months now:
http://mobile.bloomberg.com/apps/news?pid=2065100&sid=aEr028w7RVDo
http://www.bloomberg.com/news/2010-09-17/junk-bonds-reach-par-for-first-time-since-07-on-upgrades-credit-markets.html
there were other reports back in August that corporate bond funds took in $26 billion and muni bond funds $5 billion while long term government bond funds took in only $191 million. and this trend has largerly continued if not gotten more extreme as I’m to understand it. I also think last month was the first time PTTAX saw outflows in quite some time.
enough to juice the markets well into 2011? Well, who knows, though there certainly appears to be massive conviction in the “fed’s got ur back” thesis, whether that makes sense or not, I find the attitude to be present everywhere.
Anyway, happy holidays, I got some good ideas of your gift lists this year so thanks for those. Good luck to you in 2011.
I bet those “mom & pop” investors who lost money in .coms, in RE, and now in (what i’m sure their “advisers” told them are the safest instruments) treasury bonds will be thrilled… Oh, and thanks to higher mortgage rates the home prices (aka their equity in the house) will crater.
Of course, this in now way threatens the stock and commodity markets, since the Adam Smith’s “invisible hand” has been completely and irrevocably replaced with the Helicopter Ben’s “stealthy bailout paw.”
My mistakes? I hedged some corporate bonds with a small position in TBT….shoud have skipped the short hedge. I am not sure my precious metals trading was better than a simple buy and hold in metals…..I know people keep referring to the gold bubble and lumping it in with commodites but it seems to me it is becoming more of an alternate currency so I will just keep a position there as well as in silveer but loose stops seem appropriate. I did well in a corporate bond position (about 50% of my portfolio up 13% for the year) but closed it all not so long ago…right now I am focusing on big cap dividend paying equities but have plans to raise cash near the end of February or March. My ovrqall approqch is best defined as small positions with stops and just try to muddle through….good luck Barry in the New Year
So much for THAT rally!
You beat me to it, BR :-)
This is a loaded question! This year I was able to get debt free except for a 15 yr mortgage, invested and saved over 26% of my gross income(would have been much more but paid cash for a rather expensive engagement ring and did a full season at the racetrack with the motorcycle). I put a large portion of that into mutual funds and I think that was a good move. They’re all up 13-28% and allowed me to start investing without having to put up a large initial sum. This year I plan on closing out the mutual funds and investing in ETF’s. I’ll correct my asset allocation and get lower expenses. And maybe I’m crazy but I plan to continue buying bond funds in small amounts. I’m young and have a long timeline for needing the money and when I hear people pulling out and an asset falling out of favor, it screams buy (low) to me. Could someone comment on that philosophy?
Dead Hobo: Good luck. Unemployment isn’t going to get better anytime soon. Why? Austerity!! It’s coming to the U.S., if you haven’t noticed.
‘History shows us that the public tends to be the last in…’ (see current stock market for details)
We will be focusing on debt re-structuring and keeping the housing market pulled to the downside. After continued “strategic” moves we will invest in Freezer bags, silver and low fee etf’s at 52 week lows to put our excess money in. We will buy little and focus on the art of BS to keep our jobs. We will watch our neighborhoods turn into multi family rental camps and will guard our freezer bag assets accordingly.
I used to dabble in bonds. Nothing serious: Vanguard market index funds and high class corporate debt, but nothing else, I swear. Early last year I started hitting the hard stuff. It seemed so easy. A utility here, a muni there, and before you know it you have 40% of your portfolio earning 6% fixed.
I keep meaning to give it up, but it is like cigarettes. State universities, city-owned golf courses, anything but mortgages. (Not that I have any pride left, I just don’t like the taste of paint thinner.)
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