I don't think Plosser's comments are anything we didn't know already. I maintain that the Fed's actions are all about rebuilding corporate balance sheets - in particular, the banks. Banks have yet to increase loans in any significant way because of a combination of individuals reducing debt and lending standards rising to more stringent levels.
If the market insists on selling stocks off on this, use this as an opportunity to add a bit to your core income producing stocks.
I may buy back the junk bonds I sold a week ago on a pullback, although I remain a bit skeptical that I am really compensated for the risks here - I would rather own the stocks at these compressed yield spread levels.
My treasury bond fund, TLT, that I purchased a few days back is doing nicely, but if that gets back to the high 120's then I would sell that and wait for another equity rally/bond decline when the price should fall back into the low 120 area. Overall, while I think government bonds are overpriced, I do not want to fight the Fed. In addition, this is the only hedge for global unrest.
2 comments:
Hi Mario
The market has a very short memory! Blankfein comments a day or two ago seem to have more of a negative effect on the market than the bold unexpected long term sustained Fed action. The market has been so negative for so long and most negatives have been priced in, in my opinion. I believe the market is under-bought and there is a lot of money waiting to buy on the dips until year end. Higher we hopefully will go from here.
Good Morning Mario
As we discussed a suspected rebound in banking shares a few weeks ago: Now this morning: "Credit Suisse lifts US Banks to overweight". I am anticipating this will be the first of many, as analysts pile on upgrades in the banking sector. My hunch is that banking shares have quite a ways to go from here.
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