-Europe seconds that emotion
1. Europe situation resolved (for now) – investors will smile all the way to the bank
2. Stocks set to rally on what’s important – earnings and better than expected economic news
3. Continued negative investor sentiment will push market up that wall of worry
Another day, another roller coaster ride. If the market were a human being, they’d be a complete emotional wreck, seeing a whole team of psychiatrists and on a multitude of medications. In today’s market, confusion is the order of the day to say the least.
Europe has been in our face the most. However, the thought that the new kings of Europe, Merkel and Sarkozy would not come to grips with the situation, at least in the short term, was….well unthinkable. Germany needs the EU as much as the EU needs Germany, we all know that. The hardline stance was just to show whose boss. Well folks, they scored a Hat-Trick today:
1. They agreed to a hefty bailout fund – 1 Trillion Euros
2. It will be leveraged 4-5 times – using it as a backstop or insurance
3. Greek debt holders will take a 50% haircut – it should have been crew cut
With Greece and the broader EU problem off the front page, for a little while at least, the market can now focus on what matters most – earnings and economic data. In this we too have scored the proverbial Hat-Trick: (I must have hockey on my mind – Go Bruins)
1. Earnings move stocks and they have been stellar yet again
2. Economic news has beat expectations, not great but better than expected. Today we learned that GDP grew by 2.5% in Q3 while yesterday brought us an impressive rise in durable goods orders.
3. Negative investor sentiment – the market loves to go up when nobody thinks it can, and right now nobody thinks it can, so it climbs that wall of worry.
Let me toss in another positive for luck – You don’t fight the Fed! The continuation of QE Mini-Me and the probability of a QE3 can give this market some legs.
This is not to say that the world’s economic problems are fixed. Absolutely not. These problems will come back to haunt us again in force sometime next year. The world is deleveraging fast and furious and by year end the majority of the Baby-Boomers will be past 50 and therefore well past their peak spending years. Both of which will hamper demand and grind our economy to a slog through the mud at best. These issues as well as what to do in this type of market are discussed in detail in Facing Goliath: How to Triumph in the Dangerous Market Ahead, so read it if you haven’t already. We are in a temporary reprieve which is long overdue and is going to feel really good. Just don’t get carried away.
Invest for need, not for greed Successful investors should stick to the “sweet spot”. Income and dividends is still where the best opportunities lie to get the bestreturns with the least danger possible. Getting equity returns without equity risk is always our goal. Currently we are finding great yields of 8, 9, 10%+ in Preferreds, MLP’s and now higher grade Corporate bonds, which are (finally) firming up, so there is no reason to take chances with your family’s security. If you’re not collecting dividends and income in this market, you are just gambling. I talk about these very issues in depth along with specific actionable ideas on my latest Fox Appearance in their New York studio, so be sure watch the short video.
This is the most difficult market since the depression, and being wrong can be catastrophic… and that’s where we can help. Our active, hands-on Top-Down Tactical™ investment management strategy for managing portfolios can help you manage risk and deliver returns. If you would like to discuss the market, economy or simply get a free second opinion on your portfolio, call me for a free consultation today at (916) 925-8900.
Regards -Keith Springer
P.S. Free Book
If you are my mailing list, you are entitled to a free copy of Facing Goliath: How to Triumph in the Dangerous Market Ahead, a must read for every investor. Just call my office and ask for Cathy and we will be happy to give you one (916) 925-8900.