Comfortably Bullish: Market Shadow’s Newsletter

The New Year’s edition of Market Shadows newsletter is now available: MarketShadows, “Comfortably Bullish,” January 4 2013.


Comfortably Bullish


Glimpse into the Future section of the MarketShadows Newsletter, January 4 2013

By Ilene

We are starting 2013 long stocks in Paul’s Virtual Value Portfolio with no covered call writing hedges for one reason – the Federal Reserve’s and other central banks’ plans to continue printing money into existence while debasing their currencies. This does not solve any problems such as too much spending on wasteful items, a perverse tax code, and a rushed-through fiscal deal that does not reduce the growing debt burden.

(For more thoughts on the fiscal cliff deal, read The Good, the Bad And the Ugly from the Fiscal Cliff DealFiscal Cliff (Pork) NotesEight Corporate Subsidies in the Fiscal Cliff Bill, From Goldman Sachs to Disney to NASCARReplaying Chris Christie’s Epic Anti-Boehner MeltdownTotal Debt: $16,432,730,050,569.12; Debt To GDP: 103%Crowd of Fools Cheers Obama; Tweet Irony“Fair and Balanced”… And Benefiting Just 20% of Americans)

We are not celebrating progress, just taking a realistic look at our options in the face of a politico-economic world that is flawed and unsettling.

Market Shadows contributor Lee Adler of the Wall Street Examiner asked “Has orgiastic market shot its cash wad?

He concludes that, no, it hasn’t. “All the money that had built up on the sidelines from the Fed’s December pumping was seemingly all blasted into the market within the opening moments on Wednesday. However, we shouldn’t think that just because the buying looked orgiastic, that there isn’t more where that came from. The Fed will be pumping every other day now, and another huge slug of MBS [mortgage backed securities] purchase cash will be coming around mid month. That should outweigh any questions that might arise about the technical analysis, the biggest of which right now is how big this rally might be. “

 also expects higher prices. Not because the world’s economies will recover, and not because the EU is pulling itself back together, but because the world’s central banks are racing to drive down their currencies. Evans-Pritchard wrote, “Bears beware. A monetary revolution is underway” in Stocks to soar as world money catches fire, Calvinst Europe left behind:

The US, Japan, Britain, as well as the Swiss, Scandies, and a string of states around the world, are actively driving down their currencies or imposing caps.

They are tearing up the script, embracing the new creed of nominal GDP targeting (NGDP), a licence for yet more radical action.

The side-effects of this currency warfare — or “beggar-thy-neighbour’ policy as it was known in the 1930s — is an escalating leakage of monetary stimulus into the global system.

So don’t fight the Fed, and never fight the world’s central banks on multiple fronts… (my emphasis)

The New Year ritual of predictions is a time for bravado, so let me hazzard that the S&P 500 index of stocks will break through its all time high of 1565 in early 2013 — mindful though I am of flagging volume and a wicked 12-year triple top… (Stocks to soar as world money catches fire, Calvinst Europe left behind – Telegraph)

For similar reasons, Paul Price argued in Covered Calls – The Hidden Risk for 2013 and Beyond, that the chance that stocks will soar is quite high. In keeping with our thoughts for the near term market environment, Paul’s Virtual Value Portfolio is long a selection of quality companies in various industries, and we are going into the new year almost full invested.

Update: Virtual Portfolio as of 1/4/13.



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