Two holes in many portfolios

Despite the steady, not so exciting but rewarding, upward climb of the equity markets and both the positive and anxious feelings that this evokes, there are two missing catalysts in many individual and institutional portfolios that are difficult to fill.

The first and biggest is obviously Apple, a real bust over the last six months for many reasons discussed here previously(most completely in a 2/17 post).  Depite its obvious appeal to many and the fact that it is trading far below average market multiples, a catalyst is needed to reinvigorate the valuation.  Making a great COO into an inspiring CEO certainly has not yet jelled.  Vision seems to have vanished in the eyes of the market and profit taking has been rife.  This great story is certainly not over, but there is definitely a lull that affects many portfolios to the downside, and makes buying more a temptation even if our basis is on a 2003 price.

The other negative portfolio impact, not nearly as big, on many has been gold, mainly in the form of GLD but also for those who choose to hold the miners.  Since gold is simply a store of value with no particular market statistics to measure, this is simply a change of sentiment.  Maybe it's a little more than that.  With the continued rapidly increasing inequality of wealth in developing countries, those with the capacity to protect their assets through gold are feeling more optimistic, and spending more of their money.  The biggest growth market by far for high end cars---Mercedes, BMW's, Land Rover's, Audi's, Maserati's, etc. is now China.  By number of cars, not percent, there are more Bentley's in little Hong Kong than anywhere else in the world.  A final piece of the puzzle may be India, where gold is the most prized gift and possession held by anyone even in the middle class - those dowry's.  With India in somewhat of an economic downdraft and a moribund government, the demand has weakened.

The other stores of value competing with gold now are high end homes in great urban locations, and for the all important, in fact most important, central banks and major institutions the relative value of investing in U.S. equity markets, German bonds, and, finally, the resurgent Japanese securities markets is rational competition with a gold market that has for the moment seen its best moments already.

Of course the U.S. markets take their lead from watching George Soros and other economic titans lighten their positions.  They don't own the market so all of this is just a guess as to what else is behind the recent significant weakness.