Wade Slome | Aug 05, 2013 01:31AM ET
If you haven’t been paying close attention, or perhaps if you were taking a long nap, you may not have noticed that the stock market was up an astounding +5% in July (+78% if compounded annualized), pushing the S&P 500 index up +18% for the year to near all-time record highs. Wait a second…how can that be when that bald and grey-bearded man at the Federal Reserve has hinted at bond purchase “tapering” (see also Fed Fatigue)? What’s more, I thought the moronic politicians were clueless about our debt and deficit-laden economy, jobless recovery, imploding eurozone, Chinese real estate bubble, and impending explosion of inflation – all of which are expected to sink our grandchildren’s grandchildren into a standard of living not seen since the Great Depression. Okay, well a dash of hyperbole and sarcasm never hurt anybody.
This incessant stream of doom-and-gloom pouring over our TVs, newspapers, and internet devices has numbed Americans’ psyches. To prove my point, the next time you are talking to somebody at the water cooler, church, soccer game, or happy hour, gauge how excited your co-worker, friend, or acquaintance gets when you bring up the subject of the stock market. If my suspicions are correct, they are more likely to yawn or pass out from boredom than to scream in excitement or do cartwheels.
You don’t believe me? Reality dictates the wounds from the 2008-2009 financial crisis are still healing. Panic and fear may have disappeared, but skepticism remains in full gear, even though stocks have more than doubled in price in recent years. Here is some data to support my case there are more stock detractors than defenders:
Record Savings Deposits
Blah Consumer Confidence
15-Year Low Stock Market Participation
Lack of Equity Fund Buying
The Hater’s Index:
And if that is not enough, you can take a field trip to the hater’s comment section of my most recent written Seeking Alpha article, rose by +12.2% in the latest reported numbers. The housing market foundation is firming.
Auto Sales Rebound
Record Corporate Profits
Bad Banks Bounce Back
As banks around the country have repaired their debt-burdened balance sheets and sharpened their loan requirements, bank stock prices have rebounded significantly (the XLF SPDR Financial index is up +25% in 2013). Bill McBride at Calculated Risk has compiled an unofficial list of 729 problem banks, which is down significantly from the peak of 1,002 institutions in June 2011 (down -27%). There has been a significant reduction in problem banks, but the number is still elevated compared to the initial listing of 389 institutions in August 2009.
Europe on the Comeback Trail
Overall, corporations are achieving record profits and sitting on mountains of cash. The economy is continuing on a broad, steady recovery, however investors remain skeptical. Domestic stocks are at historic levels, but buying stocks solely because they are going up is never the right reason to invest. Alternatively, bunkering away excessive cash in useless, inflation depreciating assets is not the best strategy either. If nervousness and/or anxiety are driving your investment strategy, then perhaps now is the time to create a long-term plan to secure your financial future. However, if your goal is to soak up the endless doom-and-gloom and watch your money melt away to inflation, then perhaps you are better off just taking another nap.
Disclosure: Sidoxia Capital Management (SCM) and some of its clients hold positions in certain exchange traded funds (ETFs), but at the time of publishing, SCM had no direct position in any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision.
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