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Macbeth, Act 5, Scene 5

Posted by kdadmin on December 12th, 2013.

While I was never much for Shakespeare when I was young (I lacked perspective), I find Macbeth particularly suited to the last month in the market. To wit:

  • On November 12, the S&P 500 was at 1783.
  • On December 11, the S&P 500 ended at 1782.

In the between, we had a “Tale told by and idiot, full of sound and fury, signifying nothing.”

Bam! The S&P 500 runs headlong into Macbeth’s existential crisis!

As an aside, this “Bam” comment was particularly enjoyable for someone like me who geeks out over economics, literature and existential philosophy. Bwa ha ha ha ha ha!

I mean, Excellent …

Anyway, the point is that there has been no compelling reason to buy into this erratic equity market as of late. In spite of the fact that my macro analytic research supports a slowly recovery economy for 2014, and assumes that the end of QE3 is priced into the market, emotional volatility seems to rule the roost. Further, the thin trading of holiday sessions certainly won’t help. When there are fewer traders, more loudmouths rise above the din.

I have, however, bought into the bond markets. We are holding a larger than normal bond portfolio with shorter durations and higher yields than we might traditionally hold in a market NOT flooded by $3 trillion of Fed paper. The nice thing about these sorts of bonds is that they can be positively influenced by a rise in the stock market, but they also pay handsome interest and dividends while the market figures out what it wants to do …

While I’ve been talking about being fully invested in the stock market recently, every time I get ready to leap, I have to ask myself this question: “What is the compelling reason that I am getting back into “x” asset class?” If I can confidently answer that question, I’m in. If I can’t, and the only reason I’m considering it is because “everybody else is,” I have to stay out. (Do you ever remember telling your mother/grandmother that you did something stupid because somebody else did and they always asked you, “well, if your friend jumped off a bridge, does that mean you would too?” Thanks, Grandma, it’s not like I don’t feel stupid enough already …)

Although …

Bridge

Source: Explain xkcd

So, as I would rather give you the holiday gift of a great year of returns, instead of the destruction of the bridge jumping bangwagoneers, I’m still waiting with baited breath for a good reason to play with fire in this market.

In the meantime, I’ve attached our Privacy Policy, as I’m required to send you one each year. Read it at your leisure. Maybe with a bit of warming eggnog. You know what I mean …

Happy (Warmer) Holidays!

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