An anecdote about my relationship with this investing activity.

A few days ago I wrote about buying some treasury bonds (TLT) as a form of protection.  Yesterday I found myself with a gain (small) in the position but for whatever reason (reading the tea leaves, my old boss used to say) I felt like a sell off was coming, and though it is not my usual action, I sold.  (I didn't write about this because I feel it is small, way too speculative and not based on anything quantitative)  The stock promptly fell about 1%.  Good, right? Well, that's only part of the story because my "tea leaves" told me I should buy the shares back and get long again.  Sadly, this time I did not heed my gut and today I wake up with the TLT up 2% from where I sold.  Now I feel like I messed up, and yet I made money!  There is no winning.

Ugh, now where's the phone number of my therapist?

Anyway, the way I like to think about the market, it is constantly assessing and adjusting to probabilities.  Before today, there was a (u pick, but there is also a traded market on this) 70% chance that Obama would be re-elected.  At any given point in time, the market price is the weighted average of probability times outcome.  We are reassessing winners and losers.  Now we have certainty about the outcome so "A" path is embarked upon.  We, as a market, are trying to read the foreseeable future and make our bets.  Stocks are down I think, because  and stocks today are losers because taxes on dividends are going up.  I do not think there is a reflection that earnings are going to be bad.  On the contrary, the economic signs have been positive and ultimately that is what matters.

We are not out of the woods yet.  The over-riding concern is global growth and then US growth.  Deleveraging is still going on.  All of these factors point to continued low interest rates and bonds being not as risky as they appear.  I continue to believe , however that you are better off in a high quality dividend paying stock.  Muni bonds are probably ok, but we need to read the environment for "simplifying the tax code" and they may lose some of their tax benefits.  Their yields are attractive nonetheless.

I bailed on NLY and AGNC.  Rates are going to continue their march down and the margins for these business are going to come under continued pressure.  They are very leveraged companies so they are very sensitive to rates.

My stock exposure is up to around 27% and I would like to make it a bit higher as I think by the end of the year stocks will be higher than today.