Friday Tidbits

First up is a comment or two on the current goings on in the market. The action of the past few days, and really for the month of October, has been a buying panic. This buying panic came after a selling panic in September. One of the two months (you can decide which one) is closer to what is appropriate given the total backdrop we are working in now.

The bear case ties into the feeble housing and employment numbers combined with desperate action being taken by central banks in many corners of the world. The bull case ties into quite a few data points showing signs of improvements, some aspects of the earnings for the quarter looking good and a very impressive rally over the last four weeks.

Take whatever side you prefer but I would point out that most of the time these types of monster moves do occur during bear markets. There is nothing that says this can’t be a bull market because it is possible that the worst is behind us, that we will never go below SPX 1200 again and that the market has turned up in advance of an economic turnaround. This is not my base case but it could be correct. We did not get as defensive as we did in 2008 but as I’ve been saying all along, on the way down you always wish you owned less and on the way up you always wish you owned more.

Today would normally be the day that we begin to redeploy some cash but we recently switched custodians to a firm with a more robust foreign offering and it is not logistically plausible to trade in these markets late in the day Friday. As I am more interested in adding foreign, if we add anything now I will plan on next week.

One weird element of the SPX’ dance with the 200 DMA is that it went below at about 1283 in the middle of the summer and when it took it back almost three months later it did so at 1274. The 200 DMA stayed remarkably flat and obviously it is still tilted slightly downward and the 50 DMA is still well below the 200 DMA.

A reader left a comment asking whether it makes sense to avoid putting foreign holdings into 401ks or IRA for tax reasons having to do with what is withheld from foreign dividends. Not everyone has both types of accounts first of all. Secondly taxes are one of those things where people have their own thoughts about what to do and from the standpoint of being a portfolio manager the normal course of action as I know it is to simply honor any requested mandates along these lines when possible and after any potential downside has been explained to the client.

Finally there was an interesting thread the broke out on several blogs including Felix Salmon and Abnormal Returns that stemmed from a Twitter fight between Keith McCullough and Steve Liesman about going on TV too much.

Felix’s argument (and Abnormal Return’s too but not quite as loud) is to question how can someone who manages money be on TV constantly. They have a job to do and being on TV so often is time not spent doing what people pay you to do; manage their money.

Being on CNBC’s “G” list (a reference to Kathy Griffin Life on the D list) I go on two or three times a year and I will say it is fun to do. I got to do a segment from the NYSE floor a couple of years ago and that was a blast.

Without accusing anyone else of being a self-promoter in the manner Felix does I will say I don’t understand how people do their work done while appearing so much but they must figure out how. My idea of the work is that most of the time is spent reading. I read a lot of news and I read about companies. Other managers may have other ideas about how to do the job which is just fine.

Certainly there must be team situations where being the face of a group or firm on a very regular basis is the job. For however many times I have been on I’ve had to say no just about the same number of times usually for not being able to take the time and there were a couple of instances where I would not have been able to add value to their viewers (insert joke here about never adding value to their viewers).

The implication from the linked posts is that the work product suffers for the time spend being a pitch man. For someone who is inclined to hire someone the client must be on board with what is going on with any and all aspects that matter to them.

I would say the most important thing is to be on the same page philosophically as the manager. If you hire a DFA guy then you will ride the market up and down fully invested. That is not bad or good but simply a philosophy that someone hiring a DFA guy must be on board with. Asking about process, or how the day is spent or whatever else is fair game but no one will change their routine for you.

Someone who hires us knows I work from home and that once, maybe twice, a month I will have a fire or medical call, usually medical, that I have to go on (obviously this is something I choose to be a part of my life). Anyone is entitled to think this is unacceptable but then that person should not hire me. Someone who goes on CNBC a couple of times a week should not be expected to alter that behavior so if you can’t live with that then you should not hire that person.

I will say it was fun reading the Twitter fight.

9 Comments

  1. What is the yield on a MM fund. Lets just say zero.

    What is the yield on the S&P 500? What is the P/E ratio?

    Stocks are cheap compared to alternatives.

    IF you take away the fall off the cliff scenario and replace it with a muddle through scenario I see no reason why we do not get a good move up from here.

    I am not wearing rose colored glasses and I am not expecting the economy to be great for many years. I do think we have and can avoid the fall off a cliff scenario. At the very least we will kick the can down the road for many months and fall off a cliff in the future. So I think the bull case does not take that much base on current prices and current yields on debt.

    SEG

    Reply
  2. Pendulums swing. Sometimes more than they should. Aug thru Oct demonstrate this Newton’s Cradle effect rather nicely.

    Reply
  3. The dirty little secret is that many of the experts on TV have track records of performance that leave alot to be desired. Most exposure is to gather assets and to talk up or down a long short position.

    Up 20% the bulls are out in force on TV, down 20% the bears are the primary guests. Crazy

    Have not heard “double dip” for the past 2 weeks. Funny how a stock market rally does that.

    Reply
  4. It’s not necessarily where a persons body is…but rather
    ones brain that counts;-)
    Managers also become ill…
    and other personal problems etc.
    Hopefully they have a plan
    in advance and a team to take over.
    Thanks for all that you do Roger.

    Reply
  5. Roger,

    What do you mean by “buying panic” or “panic up”? Do you mean that short sellers are panicking? Or do you mean that long investors that are out of the market are panicking because they don’t want to miss out on a rising market?

    Just wondering…

    – aagold

    Reply
  6. buying panic is not a term I came up with. Panic is fear, fear in this case of missing out, or losing too much for being too short or maybe something else.

    Markets like the US don’t go up 12% in a month so when they do it is reasonable to conclude it was a frenzy or panic of some sort. It obviously does not have to reverse but a reversal should not be a shock.

    Thinking is could reverse almost as quickly is not about being bullish or bearish so much as realizing that fast moves higher are often followed by fast moves down–I realize this move up could have been the result of Sept’s fast move down.

    Reply
  7. And don’t look now, but your favorite loser Bruce Berkowitz has the top performing fund of the 4th quarter. But take heart, I’m sure he will resume his “blow up” (or is that melt-up?) soon 😉

    Reply
  8. pretty sure bill miller is my favorite loser

    Reply
  9. Roger,

    you said

    “Markets like the US don’t go up 12% in a month so when they do it is reasonable to conclude it was a frenzy or panic of some sort.”

    that sound of sounds like the market is wrong and you are right.

    the sunday and monday before the tuesday market bottom your posts showed a picture of a bear and the other was a cartoon “time to panic”

    IMO you are out of sync with the market. Happens to the best of us.

    Reply

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Friday Tidbits

First up is a comment or two on the current goings on in the market. The action of the past few days, and really for the month of October, has been a buying panic. This buying panic came after a selling panic in September. One of the two months (you can decide which one) is closer to what is appropriate given the total backdrop we are working in now.

The bear case ties into the feeble housing and employment numbers combined with desperate action being taken by central banks in many corners of the world. The bull case ties into quite a few data points showing signs of improvements, some aspects of the earnings for the quarter looking good and a very impressive rally over the last four weeks.

Take whatever side you prefer but I would point out that most of the time these types of monster moves do occur during bear markets. There is nothing that says this can’t be a bull market because it is possible that the worst is behind us, that we will never go below SPX 1200 again and that the market has turned up in advance of an economic turnaround. This is not my base case but it could be correct. We did not get as defensive as we did in 2008 but as I’ve been saying all along, on the way down you always wish you owned less and on the way up you always wish you owned more.

Today would normally be the day that we begin to redeploy some cash but we recently switched custodians to a firm with a more robust foreign offering and it is not logistically plausible to trade in these markets late in the day Friday. As I am more interested in adding foreign, if we add anything now I will plan on next week.

One weird element of the SPX’ dance with the 200 DMA is that it went below at about 1283 in the middle of the summer and when it took it back almost three months later it did so at 1274. The 200 DMA stayed remarkably flat and obviously it is still tilted slightly downward and the 50 DMA is still well below the 200 DMA.

A reader left a comment asking whether it makes sense to avoid putting foreign holdings into 401ks or IRA for tax reasons having to do with what is withheld from foreign dividends. Not everyone has both types of accounts first of all. Secondly taxes are one of those things where people have their own thoughts about what to do and from the standpoint of being a portfolio manager the normal course of action as I know it is to simply honor any requested mandates along these lines when possible and after any potential downside has been explained to the client.

Finally there was an interesting thread the broke out on several blogs including Felix Salmon and Abnormal Returns that stemmed from a Twitter fight between Keith McCullough and Steve Liesman about going on TV too much.

Felix’s argument (and Abnormal Return’s too but not quite as loud) is to question how can someone who manages money be on TV constantly. They have a job to do and being on TV so often is time not spent doing what people pay you to do; manage their money.

Being on CNBC’s “G” list (a reference to Kathy Griffin Life on the D list) I go on two or three times a year and I will say it is fun to do. I got to do a segment from the NYSE floor a couple of years ago and that was a blast.

Without accusing anyone else of being a self-promoter in the manner Felix does I will say I don’t understand how people do their work done while appearing so much but they must figure out how. My idea of the work is that most of the time is spent reading. I read a lot of news and I read about companies. Other managers may have other ideas about how to do the job which is just fine.

Certainly there must be team situations where being the face of a group or firm on a very regular basis is the job. For however many times I have been on I’ve had to say no just about the same number of times usually for not being able to take the time and there were a couple of instances where I would not have been able to add value to their viewers (insert joke here about never adding value to their viewers).

The implication from the linked posts is that the work product suffers for the time spend being a pitch man. For someone who is inclined to hire someone the client must be on board with what is going on with any and all aspects that matter to them.

I would say the most important thing is to be on the same page philosophically as the manager. If you hire a DFA guy then you will ride the market up and down fully invested. That is not bad or good but simply a philosophy that someone hiring a DFA guy must be on board with. Asking about process, or how the day is spent or whatever else is fair game but no one will change their routine for you.

Someone who hires us knows I work from home and that once, maybe twice, a month I will have a fire or medical call, usually medical, that I have to go on (obviously this is something I choose to be a part of my life). Anyone is entitled to think this is unacceptable but then that person should not hire me. Someone who goes on CNBC a couple of times a week should not be expected to alter that behavior so if you can’t live with that then you should not hire that person.

I will say it was fun reading the Twitter fight.

Submit a Comment

Your email address will not be published.

WP-SpamFree by Pole Position Marketing