This morning, I am a bit off my game. Last night, my new Spanish friend took me out in her town. She wanted to show me the “real” Spain, the Spain famous for its “tapas.” Tapas are small bites of food layered on a piece of bread, at least that is the tradition of it. My friend told me it all started as a way to keep the fruit flies out of your wine in the summer. Folks would simply put a piece of bread across the top of their glass. Well, as evolution goes, somehow that practical measure evolved into what we have today, a custom that involves bread, for sure, but included as well is food and, of course, wine, which is one reason I am off my game this morning. More than the wine, though, it was the late hour. You see, the folks here in Spain run their 24-hour clock just a bit differently than we do in the states. For them breakfast is at noon, lunch is at five, and dinner, is well, late into the night, which is why I did not get to bed until late last night, which is the real reason for my sluggishness this morning …
The market bounced back yesterday. Although it couldn’t hold onto all of its gains, it still sent the message the bulls have not been run out of town. Take that message to the bank if earnings come in stronger than expected in the next few weeks. The market still wants to go up, and if the news out of Europe (yes we are back to that boogey man) is more of what we got yesterday about the bond auctions in Spain and Italy, expect the market to react positively, as well.
With the S&P500 still up over 8% in 2012, many investors are looking to protect their gains by selling, rather than buying the dip. Worse still, the huge camp of those who claiming they were poised to buy stocks upon any dip has gone completely quiet.
The above is an opinion I share, somewhat. A lot of the selling recently is because it is better to book profit for your clients than it is to book losses, so when you have a huge run up, such as we have had last winter and this spring, it is natural to see this. The good news is there seems to be no panic, and why would there be? Sure, the market shows fear day to day, but in the big picture, there really is nothing to fear. This is not 2008, not by a long shot. The economy is now on the other side of that circle.
According to Hank Smith, chief investment officer at Haverford Trust, investors cowed by the market’s decline are making a mistake. What’s more Smith actually welcomes the selling. “We’re not intimidated by the pullback” he says, “We think it’s healthy.”
Yes, that is what I am talking about. No Roubini fear with that man. No “run out and buy gold because the world is coming to an end” from him. And speaking of gold, what happened to the investors who bought gold at the top of the rally? Are they still hanging onto the hope that gold will go to $5,000 per ounce by the end of 2011? Even better, what happened to those who recommended gold at $2,000 based on that now outdated notion? Wait! Even better, what happened to those analysts who made the prediction that gold was going to $5,000 per ounce. Is anybody still listening to them? Does anyone really care what they have to say?
Smith draws a parallel between 2009 and the late 1970s when stocks were officially declared dead just prior to the start of the greatest rally in history.
Frankly, Hank Smith is more my cup of tea. I like reality, a market based on what is real, not one based on how bad things will get. Too much of that exists in the market, and it is high time investors faced reality – things might be slow economically, but everything is headed in the right direction. There! I’ve said it again …
Trade in the day – Invest in your life …
