Wednesday, September 18, 2013

Surprise!  Not.

This episode reveals a little appreciated fact about investing.  You can be right and lose money (as I have).  I did not believe it made any sense to let off the easing pedal (at least if you believe what the Fed said they were looking at).  And so, it came to pass.  At least for now.

The end of the fed accommodations is approaching, but for now they are holding the line.  Which brings me to y other point which is the lack of top line growth.  I do not believe stocks should go up merely because rates are staying low.  That does not make sense either.  I think that rates have been low for long enough that the "refi" at the corporate level is basically done.  Earnings will not improve much from lower financing rates.

So earnings at this point have to come from productivity or top line growth.  Productivity is tough when companies are not making significant capital expenditures (which they haven't because they have been squeezing margins to get every last dollar out).  So it needs to come from top line and I just  don't see it yet.

Thus, I am taking my equity exposure down significantly - to about 10%.  I could still benefit from a rising stock market as spreads improve on the ETF's that were pummeled, but we shall see.


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