Get and stay In The NOW
Friday I was reminded of the importance of being in the NOW. Life is about the now and dwelling on what has been and worrying about what might be are really distractions we manifest to keep us from enjoying and experiencing the now.
Ok that was my Deepak Chopra moment of the day, but it really has relevance when we look at what is going on in the market.
We suggested that Friday would be a quiet day and indicated that the market will squeeze down another 3-5% over the next couple of weeks. The market was quiet (when looking at volume) and we took a step in the direction we suggested. Yes it was a bigger step than we thought might happen.
So let's look at the now. We are seeing an S&P 500 trading below a 14 multiple. That is below its long term average of 14.7. (I think that is correct. We know there are some FAs and industry people who can confirm that as I cannot place my cursor on that exact figure at the moment.) You might say that is only 8 or 9 basis points below the average, but you have to take a look at it another say. That delta is 6.2% off its long term average (13.8/14.7). If the market we to correct towards its long term average, think about a 6% swing upwards? We would be back to $11.500 on the DOW.
Do we think that will happen? Yes it will. We don't know when, but know these levels are approaching an oversold inventory. Go to the SEC website and watch the daily schedule 13 D filings indicating what the big money is doing at this moment. They are buyers, not sellers. Of the 20 or so 13Ds listed for Friday most were acquiring their own stock or funds adding to their positions. You have people frantically selling and the funds are buying on the way down.
Now you can worry and guess what the week will bring, but really focus on the now. The value of your stocks are the value of the stocks right now determined by what might happen in the next 12-24 months, but the value is now. You loved these stocks just a few weeks ago, are they really scaring you so much you want to sell? We hope not, but could not blame you. If you listen to all the crap on TV in the last 8 weeks, no wonder consumer sentiment is in the toillete. When you have the President and heads of Congress saying we have to fix the national debt or we are all going to be poor and loose everything we have, and then don't fix the debt? Now wonder you feel like selling everything you have? Every 19 seconds you see an ad for selling your gold teeth
as it is ONLY logical investment over the next 6-18 months. We can't blame you for considering selling everything and getting into gold.
We just suggest you look at the now. We have some core holdings (XOM, AAPL, AMZN, UN, CMG, HON, PNC, WY, and ZION) that are down 2-22%. This goes against our (Actually O'Neill's IBD rules) rules of selling on a 8% drop. We are breaking those rules because the value of those companies are worth the risk and conviction, or so we think. If we were more liquid, we would be adding to the positions.
As we mentioned we are back stopping theses with some better than never puts in order to be protected from an Armegeddonish drop in the market. Puts are cheap insurance for your core holdings. If you want more info about using PUTs, and other option strategies check out this website.
We will give you more details about Barron's and the week ahead later in the weekend. Enjoy the NOW.
Salve Lucrum
