"So never mind the darkness we still can find a way
Nothin' lasts forever, even cold November rain."
Never mind the darkness, we still can find a way. Wow, we go from the worst Thanksgiving week in history with the S&P 500 down -4.65%, to the best week since the rally out of the abyss of March 2009 with a massive gain of 7.32%! Of course the two week gain is only 2.32%. All we needed was a helping hand from the worlds central bankers/planners!
Do you think the market is trading on fundamentals or something else? A trader expressed it best, "Trying to do ANY sort of fundamental analysis in this market is like bringing a #2 pencil to a gunfight." The story of both weeks continues to be Europe, and its various states of solvency/insolvency. With the Fed and its central bank peers willing to print currency to prop up the US and European banks all is well, for now. "And when your fears subside and shadows still remain, oh yeah." Fears may have subsided, but the shadows of the global debt deflation still loom.
Clearly I have been in the glass half empty camp for some time. Mostly due to my stubborn belief that printing money to devalue the amount of existing debt is not a viable long-term solution. We are simply too afraid to let anything fail, and are unwilling to take short-term pain, even though we know deep down that we are creating bigger problems for the future. And that future is getting closer and closer.
How do we manage money in this type of environment? Carefully, very carefully. Lets look at some facts. Global markets have reacted very positively to more than 35 easing moves from around the world. Merkel, Sarkozy, and Draghi are ready to introduce a tighter fiscal integration in Europe and cut ECB rates. While this is clearly a long-term positive, and may save the Euro, it also will exacerbate the current European recession. The US economy is clearly strengthening, employment is improving and housing is stabilizing. Maybe its just a case of "been down so long it looks like up". Whatever the reason, my indicators are starting to tilt more towards risk-on. Nothing dramatic, but some important changes.
Here's where we stand today in our Global Tactical Asset Allocation Portfolios:
The big change from the end of October to the end of November are the increases in US stocks (VTI), US real estate (VNQ), and energy MLP's (AMJ), and the subsequent reduction in cash from 40% to 30%.
US Equities -- 12% Neutral,
we are now at our neutral US equity weight.
Int'l Equities -- 5%
Bearish, we are now at our minimum International equity weight.
US REITs -- 4%
Neutral, we are now at our neutral target of 4%.
Int'l REITs -- 2% Bearish
. The sell-off in Europe has knocked these stocks down.
Gold --10% Bullish, with the currency presses running full out, gold and gold miners are acting better.
Commodities -- 5% Bearish, we are now at our minimum target of 5%
.
US Fixed Income -- 18% Bullish, but fixed income securities are showing some signs of weakness, neutral is on the horizon.
Int'l Fixed Income -- 6.5% Bearish, European banking problems have spread to emerging markets.
Cash Equivalents & Currencies --38%, divided between the US at 30%, 5% in China, and 3% Australia.