Monday, November 02, 2015

Today's equity market lifts, the cycle continues...

There was a grim U.S. equity market in August and September, and then came an upbeat October, that supposedly most challenged of months.  October market sessions closed just before Halloween and there was no treat that day, but today followed with no trick, in fact a big treat.  What can one make of this other than to say it's just the market, as in that's just Susan, or that's just Dad, or that's just life.

There are many reasons that the market is rising over time in fits and starts.  Merger and acquisition activity is robust, with low interest rates and new areas of consolidation in health care, biotech, finance, and communications, among others. There is still beaucoup money on the sidelines with corporations, retirees, millennials, sub-millennials or whatever they might be called, and those retail investors in their fifties with money to invest but overcome by fear of losing what they have worked for.  The case could be made that the money in most of those places is never coming back, and if it does that is the sure sign for a bubble burst set-up, no win situation short term.  That considered, it remains a major backstop.

What is known is that it is wise to participate cautiously and stay the course with good choices. If good choices go down broadly so does everything else, so money saved will not be worth much.
Today's market highlighted the dilemma that investor's face.  They can't sit on the sidelines.  They must buy and sell at least sparingly, maintain enough liquidity for a year or three or more depending on risk tolerance and potential liquidity needs, and react to good news and bad news in whatever they own in any way they choose, hold, reduce, or add, but act.  That makes a market.

Buys here over the last two weeks, AXE and FLWS as new positions and CUBI, UTX, and JNJ as additions to existing ones all went well, but of course they would, no genius required in the market of the month.  Sales of SPLS and half of an ORCL position happened for good reason, loss only at ORCL.  Ellison is paying no attention to the company, and who would given the company he keeps at his age.

There are reasons for the market to go up that have nothing to do with the overall economic environment.  The U.S. is still the deepest and most transparent financial market in the world, and at the moment is the only major country in the so-called developed world with a claim to some sustained growth, low as it is.  The U.S. equity market is relatively attractive, and money globally follows relatively attractive opportunities.  The strength of the dollar is a major part of these equity flows to the U.S.  Catch the good companies with dividends or techs with momentum, and catch a currency gain as well?  One could ask why the U.S. market is not up more if this is really a global market.

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