Everybody is familiar with the Goldilocks and the Three Bears fairy tale. In recent years, the idea of an economy that is “not too hot and not too cold”, has gained traction as the ideal economic scenario. The idea is that if we are not growing too fast, the Fed won’t tighten credit quite so rapidly, and if we are slow enough in the GDP rate, the Fed will have incentive to keep their QE posture in place. The question becomes whether Ben Bernanke and the rest of the 7 dwarfs are reading the tea leaves correctly or do they think that further stimulus is warranted or unnecessary? We are the first to tell you that we don’t have a clue and that, indeed, stock market prognostications are worth what you pay for them (btw, you are paying us nothing for these missives; so, caveat emptor). However, honest effort is required. After all, you cannot just sit back with your hands behind your head and proclaim nothing; so, here goes. We think that the market may be choppy for a time, but ultimately resumes its upward bias. By ultimately, we mean the third quarter. We want to get past the summer. My partner and I have been doing this for 55 years combined, and I can tell you that for the most part, July through October is, at best, a hit or miss kind of game. We don’t like those odds. Yesterday, we talked about this being a market of stocks and not a stock market. The very nature of that outlook creates slim buying opportunities. We much prefer that of a boat being lifted by a rising tide. It puts the odds in our favor. It is also why more and more, we spend time looking at equity ETF’s. During times like this, it is much friendlier to be long or short baskets of equities rather than one or two at a time. The odds are better, and in these kinds of markets, you need to kind of assess the odds whether it be overall market direction or sector issues and try to align those odds in your favor. For now, we have still not seen the market reverse from market in correction to a resumption of the uptrend. We believe that this is largely because of the lack of conviction evident in the volume numbers. Experience teaches us that trying to pick bottoms or tops can be terribly risky. We much prefer trying to get the middle of a move. Inherent in that outlook, is a clear market signal. We still don’t have one; so, we are still patient. Trust us with this; when it does move, so will we. This and/or the accompanying information was prepared by or obtained from sources which DFE believes to be reliable but does not guarantee its accuracy. Any opinions expressed or implied herein are not necessarily the same as those of DFE and are subject to change without notice. The material has been prepared or is distributed solely for informational purposes and is not a solicitation or an offer to buy any security or instruments or to participate in any trading strategy. The investments or strategy discussed may not be suitable for all investors. Past performance does not guarantee future results. Sale of option contracts can be risky and may not be suitable for all investors
Posted on: Tue, 09 Jul 2013 16:26:25 +0000
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