I have to hand it to Minyanville because I think they
hit the nail on the head with this article.
So why is everything
grinding onward and upward, making everyone feel as if things are
overdone and sliding imminently toward the abyss? My belief is that it
is a continuation of the politically driven emotions I dubbed "The
Malaise" in one of these notes penned back in August of 2010. Politics
and the divisive emotions surrounding politics have continued to grow
more volatile, further away from consensus; and with the death of truly
"fair and balanced" media outlets (at least any that are widely read or
heard), public opinion continues toward the negative on both sides.
This is can explain quite a lot about peoples thoughts on the market as it grinds higher into record territory. America is firmly entrenched into two warring camps. Each side has party organs and an echo chamber for them to reinforce their ideas. Fox News and Talk Radio fills conservatives with the idea that "the socialists are destroying this country and their way of life." While MSNBC, Hollywood and the rest of the media fills liberals with the idea that "the Koch brothers, Christians, and evil White guys are destroying this country and are literally killing people with global warming, fatty food, pollution, guns, racism, income inequality etc."
This thinking infects the idea of a stock market bubble at many levels. So we have the GOP wanting a crash because it will hurt Obama and economic pain will usher them to victory. They say the jobs numbers are wrong and cheer when our GDP growth is terrible like in the first quarter of this year. The GOP used to be pro-growth but they don't want to give Obama credit for anything. They even call the Import/Export bank "crony capitalism" and the stock market gains a sham created by Obama's point woman Janet Yellen. Hell, they want to abolish the FED and shut down the government if they don't get their way.
The Dems want a crash because it will hurt the Fat-cat bankers and take care of some income inequality by making the rich suffer. The only reason the stock market is up is because of a bubble caused by funny money that should be going into social programs, and not into the pocket of rich white guys. They want to either see those rich white guys suffer with 90% taxation or a huge crash that wipes them out.
The worse part is all a 0-sum gain to these people. The above-mentioned article points out that a 60% win is equal to a 100% loss in this "era of Malaise." I would love to see corporate taxes lowered but the Tea Party says it is "corporate welfare that we cannot afford," the mainstream GOPers fear the Tea Party, and the Dems can't back it because they think corporate tax rates are actually too low. Even cutting middle class taxes will probably not happen because a win for the GOP would be a loss for the Dems and vice versa.
So we have every political side rooting against the stock market because it will hurt the other guy. Then we have a Caliphate forming in Iraq and Syria, the Kurds succeeding, Israelis and Palestinians shooting rockets at each other again. The Ukraine fighting against Russian separatists and North Korea firing its own missiles every now and again. That is a wall of worry if I ever seen one. So I think stocks grind higher with people getting more and more pissed off that it is happening. I have to finally agree with this assessment:
The recent rebalancing
to bring our core portfolios back in line with the target allocations,
and also raise a little bit of cash, certainly feels like the right
move. Again, our opinion is and always will be, that investing for the
long term should be thought of as operating a rheostat and not a light
switch. It's not "risk on / risk off" -- it's turning up the wick and
backing it down at times, but the flame continues to burn.
I have been doing this for the most part by selling off winners and holding cash looking for a place to put it to work. If the market corrects it will be time to jump in with both feet.
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