My investment Philosophy
Negativity is everywhere. For the first time that I can remember there is significant talk of Stocks being abandoned as an investment. To a certain point I think this is correct. People have been burned, not once but (at least) twice. The internet bubble was the first then 10 years later the Housing collapse in 2008.
For me, I remember the internet bubble quite well. I received some deferred compensation and piled it all (well almost all) into the NASDAQ. This was March 1999. You do the math, it is to painful for me. But this situation taught me a lesson. A valuable lesson. All good things come to an end.
I have written about my trading style before. Definitely not conventional for successful traders. I scale out of positions and rarely add to winning trades. Seldom do I have an objective to a trade. Rather I hold a position until it doesn’t feel good anymore. I have been criticized on this site (via comments) about it, but it is a style that has worked for me. I happen to feel that markets do not normally move one way. Also your luck has to run out eventually. My experience has been that traders who add to winning positions eventually stop out near break even. It seems to me that longer term traders have more success with this strategy especially if the trade has positive carry. But overall I try to stay away from it. That is not to say that I have never done it. Years ago I was long UsdSgd for about 3 years. I was long varying amounts (and sometimes square) but never short during the period. Another time i ran a core short UsdBrl trade for about 2 years (although there were a few days where I was long), but a large part of these strategies were due to the positive carry and a prevailing Dollar sentiment.
Now back to Stocks.
Job’s, where will they come from?
Job’s, where are they? More and more I am wondering where we are going to get them from. I started this year very positive, but now I am beginning to think I was wrong, totally wrong. I walk the streets and see more and more empty store fronts. I work in an industry (finance) with an increasingly contracting profit potential (if the profit was even there in the first place is another story). Corporations are hiring less and asking more of the people they currently have. The current employees are happy to have a job and keep quite about the increased workload.
If my current employer is a microcosm of the entire industry (and i think it is) we are looking at an institution looking to “dumb it down” (for lack of a better term), while hiring less but asking the same amount of production out of its current staff. I have not seen a mass exodus from my job, nor protests occurring on the trading floor. As one co worker put it, we are in an environment where “we re-adjusting our expectations of what is a correct salary and workload.”
So I repeat my question “Where are the jobs going to come from?” I wish I knew!
I am becoming convinced that all of the different Job creation plans are a bunch of Mumbo Jumbo. One plan I read talked about investing in infrastructure. It worked to get us out of the great depression but this time around I think the effect would be much less then before. A great percentage of the current unemployed are middle management and office workers. Forget whether they want to do this work, more importantly are they capable? Yes, workers from the construction industry would be able to slide into such a role but laid off manufacturing workers would need training. Training would require (Federal) funding as would the infrastructure repairs. In the current environment I do not think that Congress would have any appetite to attempt this fight.
I do not see large corporations adding significant employees. I see more and more corporations hiring seasonal employees or temporary workers. They are cheaper, easier to fire and require no benefits.
I think the one place there is a chance for growth is in the small to mid size companies. According to the SBA, 64% of the net new jobs come from these firms. That is more then half of nonfarm private GDP. It would seem that this avenue should be explored as it seems to me that the last 4-5 years have been a total waste.
Euro takes the lead
After weeks of the U.S. Debt deal taking center stage today the Euro elbowed its way to the front. Poor European Earnings drove stocks lower. Couple this with the U.S. debt deal and it gave the market a reason to take profit. This however I feel is a short term move. Nothing here says “change in direction”, rather it is a bump in the road on our way to a lower Dollar.
With Spanish elections on the way, the door is increasingly opening for a more physically responsible government Click Here.
This is a trend that can gain momentum across the region and should add a lot of strength to the Euro. I am playing it from a basket/positive carry perspective.
A Week Later and,
Still SELL the DOLLAR !
So I have been away from the market for a week and I still see nothing that signals a reason to buy the Dollar. The Debt debate rages on, Europe is still trying to figure out what to do with its problem children but it seems no one really cares. I still like being short Dollars, specifically in a basket (owning high yielders and selling low yielders) with an over sold Dollar position.
I also came across a very interesting article concerning China. It brought up very interesting points that I think many are missing.
The Currency Peg. No matter what everyone says there is still a Peg (ok a Currency basket). As long as the peg is in place the Chinese need to purchase U.S. assets. No Peg and then U.S. Assets could be in trouble, but I do not see that happening in the near term.
Another reason to Sell $Dollars$
There are many reasons to sell Dollars these days. A quiet desire by the Obama administration for a weak Dollar. An Economy that has (severely?)under impressed. Low U.S. yields leading to an exodus toward higher returns. And now a break down in the talk to raise the Debt Ceiling. I still think a deal is reached but no matter what the market wants to Sell Dollars and the U.S. Government is doing little to stop the out flows.
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