Thursday, March 28, 2013

Last Man Standing

It is like it has always been.  S&P is the one immune to the global weakness.  China is weak, so is Europe, and the S&P is ignoring it all.  Dips are bought without fear.  The outperformance of the S&P is notable, and everyone notices.  But it's still the same game.  Corporate buybacks, reducing supply, with demand steady, leads to higher prices. 

The only way this game ends is if the economy goes into the tank, and corporate profits get hit, which will make the corporate bond window less available.  You need to see junk bond yields jump.  I don't expect much excitement over the coming weeks, S&P will ignore everything until the above happens.  


OR said...

Owl, if you needed to short something as a hedge, what would you choose ?

Anonymous said...

Another thing to keep in mind is that the US equity market is protected by Bernanke put, making it a suitable safe haven like the US bond market. Every international crisis will trigger inward flow of money into *both* US bond and equity markets.

Market Owl said...

Hedging what? US equity exposure? I would short AAPL. It is the ultimate US equity hedge, it goes down no matter what.

OR said...

Yes, I meant hedging US equity.
Thanks for your suggestion.
I don't like shorting individual stocks, I'm aiming for sectors, etf's.
But thanks anyway, I really like reading your posts.