Stocks retreat, but what's the real story?
The S&P index(SPY) has now been down 5% in the last 10 days. There is still not an insignificant short postion in the SPY. There may be more downside, but one hope is that we now are going to have a real investing opportunity. Whoo be do.
The SPY has around a 2% yield, before today and its price has been up 27% over the last 52 weeks. One could suggest that it needs a rest. Markets that go straight up for an extended period tend to go straight down in a crisis. Right now one could see this as a healthy correction. One, of course, never knows but long term historic analysis suggests that equities will go through fits and starts, but outperform other investment choices in securities over time. Look no further back than March 2009 and the significant rebound since that time for those who held their ground and for some who made a few opportune investments that led to a windfall over the last four years(I do wish that I had made more of those "opportune" investments at that time but I was losing sleep just hanging on to what we had and was not aggressive enough about all of the opportunities that existed at that time. Who was?). Now there may be some settling down, some pull back. It may provide an entry point soon for money on the sidelines.
With all of the essentially cash equivalents waiting to be invested, the recent SEC suggestions about rules for money market funds may light a fire under investors' need to at least take more equity risk, especially in international branded large caps and in small caps with little research coverage but with sound balance sheets and product competitive advantage. To my dismay I missed much of the surge in biotech small caps this year. I don't understand the stocks and to me it's not at all predictable and an FDA craps game. When the game is won the rewards are high and for those in the know, not me, 2012 was a good year.
While I stay fairly well, or overly, invested in equities, other accounts managed here had a good year in 2012 due to a real estate sale. Most of the money has either gone to the taxman or stayed in cash equivalents. How do you find opportunities in a constantly rising market. I'm not Warren Buffett. We don't have unlimited capital and the ability to buy whole companies. We are just retail, looking for an entry point that has some upside over time, and for younger ones hopefully a long period of time.
I know that trying to time the market is a "fools errand" for small timers, but it can be done to some extent with effort, alertness, and luck, and as a friend contstantly reminds me, low expense ratio index funds like Vanguard. Now may be the opportunity to put some over the top cash postions to work in modest increments over time.
Postscript ... there is this ongoing seemingly useless debate on media outlets over who rules the markets, who are the smartest, the bond guys, the equity guys, or I add a couple or others, the FX guys or the commodities guys(guys includes gals as well). I hope to conjure up some thoughts about this in the next few days. First thought, they are all in it together and depending on the market at any given time, some have ascendency. There are other thoughts here as well, what they are may come to me in my erratic sleep some night soon.
The SPY has around a 2% yield, before today and its price has been up 27% over the last 52 weeks. One could suggest that it needs a rest. Markets that go straight up for an extended period tend to go straight down in a crisis. Right now one could see this as a healthy correction. One, of course, never knows but long term historic analysis suggests that equities will go through fits and starts, but outperform other investment choices in securities over time. Look no further back than March 2009 and the significant rebound since that time for those who held their ground and for some who made a few opportune investments that led to a windfall over the last four years(I do wish that I had made more of those "opportune" investments at that time but I was losing sleep just hanging on to what we had and was not aggressive enough about all of the opportunities that existed at that time. Who was?). Now there may be some settling down, some pull back. It may provide an entry point soon for money on the sidelines.
With all of the essentially cash equivalents waiting to be invested, the recent SEC suggestions about rules for money market funds may light a fire under investors' need to at least take more equity risk, especially in international branded large caps and in small caps with little research coverage but with sound balance sheets and product competitive advantage. To my dismay I missed much of the surge in biotech small caps this year. I don't understand the stocks and to me it's not at all predictable and an FDA craps game. When the game is won the rewards are high and for those in the know, not me, 2012 was a good year.
While I stay fairly well, or overly, invested in equities, other accounts managed here had a good year in 2012 due to a real estate sale. Most of the money has either gone to the taxman or stayed in cash equivalents. How do you find opportunities in a constantly rising market. I'm not Warren Buffett. We don't have unlimited capital and the ability to buy whole companies. We are just retail, looking for an entry point that has some upside over time, and for younger ones hopefully a long period of time.
I know that trying to time the market is a "fools errand" for small timers, but it can be done to some extent with effort, alertness, and luck, and as a friend contstantly reminds me, low expense ratio index funds like Vanguard. Now may be the opportunity to put some over the top cash postions to work in modest increments over time.
Postscript ... there is this ongoing seemingly useless debate on media outlets over who rules the markets, who are the smartest, the bond guys, the equity guys, or I add a couple or others, the FX guys or the commodities guys(guys includes gals as well). I hope to conjure up some thoughts about this in the next few days. First thought, they are all in it together and depending on the market at any given time, some have ascendency. There are other thoughts here as well, what they are may come to me in my erratic sleep some night soon.
posted by John Borden at 6:44 PM
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