Saturday, September 21, 2013

Oh, what we have in front of us - OR - Same stuff, different day

Maybe it's just me, but it sure seemed like everything market I read or listened to last week, up until Friday that is, was decidedly bullish on stocks. The market had, they say, priced in a $10 billion taper, Syria was off-the-table, earnings were looking decent for 2014, business optimism was picking up globally, yada yada yada. Then came Friday, with a few profit takers in tow, and nary a buyer to be found. Hence, all but a half-a-percent of the week's gains went poof. And oh what a week we have in front of us.

All the focus will be on the disorganized, disoriented, disgraceful political process of funding the U.S. government for another year. No deal by a week from next Monday, and they shut it down (don't sweat it). The Republicans are demanding a complete nonstarter (the defunding of the Affordable Care Act [aka Obamacare]). But hey, when they pass that continuing resolution they can tell their eggers-on that they gave it their best shot, and that they'll be back, very soon, to fight another day. I can understand wanting to undo Obama's ambiguous albatross, but I just don't get the Republicans' strategy. They have literally no shot at a defunding, and run huge risk of getting politically killed by the ricochet. If political gain is their aim---which it absolutely is---they'd be much better served to simply illustrate for the American people the harm it's already dealing to employers/employees. And to go after the fact that Obama, himself, agrees that Obamacare is a mess: as evidenced by some 1,200 waivers handed out to the organizations he holds dearest (unions, etc.). It ought to be a no-brainer!

Back to the market: Here's the thing, we are going to have that 10% (at least) "correction", we are! It may come next week, it may not. It may come during debt-ceiling-October, it may not. It may come with this year's winter weather, it may not. It may hold off till well into next year, it may not. And, on top of that, we will absolutely have a 20%+ bear market, we will! It could come tomorrow, it could come in 2016 or 2026, and several times in between. I don't have a clue as to when, but I promise, it's coming. And thank God it is! Seriously folks, we are talking about an auction. Some folks come to sell, thinking they're getting a good price. Some folks come to buy, thinking they're getting a good price. Each party to a transaction must have some historical reference that inspires him to transact. Plus, there's nothing more effective at correcting imbalances and setting stages than a good old bear market. As counterintuitive as it may be, we long-term, well-diversified, willing-to-rebalance (buy and sell back to our target allocation in the face of bull and bear markets), investors should all welcome---yet never try to time---them.

Here's a little dose of reality I penned last year when we were dancing on the edge of the "fiscal cliff".

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