How do you define short-term view?
Well, that's up to you. But one of our definitions comes from all the negative talk about the price of oil--that is, energy.
Mutual funds are noted for looking at the market from quarter to quarter. They are performance prisoners. A couple of years ago gold ended what many believed was a 12 year bull market run-up. All along the way short-term views were calling for its decline.
Energy until the recent downturn enjoyed what was pretty much a three year upswing. Now according to many, those much-despised hydrocarbons are joining gold. Main stream media has tossed both to the Wall Street bone yard without benefit of the customary elegies.
The reasons are legion: a strong dollar, much supply and little demand, China, deflation risks, a sickly European Union and so on. What's important here is many of the naysayers are talking like the world is set go on a steady Japanese economic diet like the one they've been munching on for a couple of decades.
Anything is possible. Obama Care could turn out to be the greatest healthcare advance since the use of leeches. But we doubt it. And we doubt that it's time to start playing taps for crude. Hard currency and goldbug haters were wrong about gold for 12 seasons. As any rabid college football fan knows that's a long wrong that would put lots of highly paid head coaches looking for work.
But then media talking heads aren't held to the same high standards as football coaches.
At the start of 2014 all the economic stars were aligned, so the investment palaver went, for bond prices to decline and interest rates to fall and shorting the Treasury bond market was a no-brainer. Ask some of the macro crowd how that turned out.
What a lot of investors seem to be overlooking or failing to consider is the strong dollar surge, falling oil and gasoline prices, might be signaling the end of the low interest rate cycle and not the perpetuation of it, as in one final exhaustion leg down.
On Monday the Society of Professional Forecasters (Now there's group we can get fully excited about!) announced the Fed's favorite price index would only rise 1.5%, down from a previously forecast 1.8%. And the outlook for next year got sliced also to 1.8% from a previous 2%.
Several years ago we recall reading that the investment record of MENSA members, you know those brilliant people with the high IQs everyone envies, failed to match the S&P 500 index. And it wasn't even close. Those SPF people say the Fed's 2% inflation target won't get hit until 2016.
Because something hasn't happen doesn't mean it isn't going to happen. And that's where all the celebrating about all the money printing not causing any inflation might prove premature.
Corporate profit margins are up but are they anything to write the folks at home about? Not hardly, since little of that jangling change went into capex and most of it into mergers and rewarding share holders. It's called the lessor of two risks. Why incur the wrath of more government regulations when one can take the easy road?
This whole scenario smells like an upcoming year where everything has to go just perfect to avoid the untoward.
In the meantime, remember what's important. You're still on your own. So do your homework.
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