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Stocks continue to struggle to find a direction. On the one hand you have no real reason to sell but on the other hand investors are being bombarded by news stories about how the market is overvalued. Maybe it is, maybe it isn’t. Maybe we are in a bubble, maybe we aren’t. The only way to know is 20/20 hindsight which doesn’t help investors today.
At the end of the day money always goes where it is treated best and as long as you can’t earn anything in bonds or cash and commodities continue to stink, stocks are still the only game in town.
Mohamed El-Erian stepping down as CEO of PIMCO
Big surprise yesterday when El-Erian announced he was stepping down as CEO of PIMCO. He was originally brought in as the successor in waiting to Bill Gross, who is 69, and to move PIMCO into liquid alternatives among other areas. After an awful year for PIMCO’s flagship Total Return Bond Fund, a cloudy future outlook for bonds in general, and the dismall returns of a global asset allocation fund he was co manager of, there is probably an interesting story here that hopefully we will hear about at some point.
Nobody can predict the market as I have said many times and will continue to say, and most of what the talking heads say on financial news is completely meaningless, but whenever I have CNBC muted in the background and El-Erian would come on I would un mute it as he would usually have some interesting insight.
Are You In the Majority?
Saw a brilliant quote from Mark Twain the other day:
“Whenever you find yourself on the side of the majority, it is time to pause and reflect.”
This definitely applies to markets (and a bunch of other areas of your life). The majority still believes that Modern Portfolio Theory and asset allocation work. If they were to pause and reflect they would see that not only don’t they work, they actually can’t possibly work unless you have a crystal ball. They only appear to work because they have you fully invested and markets go up most of the time. If bear markets never happened then that would be good enough but unfortunately they do. When the next 2008 comes (unless you believe 2008 was a 100 year storm, in which case I have a bridge in Brooklyn to sell you) anything that has you buy and hold will lose tons of money.