The markets have been getting more and more interesting lately, writes Roger Nusbaum, which is why I spend so much of my time studying and trying to decipher what it all means.
Right before earnings season started I said in an interview that, like the first quarter, I did not think that earnings would be the most important thing moving the market. Not unimportant just not the most important. Earnings help assess the health of a company to be sure but we have so many other things going on that are capable of driving the bus shorter term.
Recently I added some tech exposure for clients. I had a severe underweight in the sector, some cash built up and was liking the action in the yield curve (getting a little steeper). I am still underweight the group but not as much and I lucked out with a decent entry point.
Then the revaluation news came from China. Most clients have owned one Chinese stock for a long time. I may add more exposure but I have not figured out how I will do that just yet. I'm not sure what, if any, further reaction will come from the revaluation over the next couple of months but I do have real long term concerns, as I have written about before. If you don't do much foreign investing this might be the bell ringing telling you to learn more about it and get going.
One byproduct of the revaluation is that, according to Barron's, Malaysia has now dumped its currency peg between its ringgit and the US dollar. While there is not much economic consequence this is symbolic that the US dollar is now a less important currency.
On a different note I got to meet Gregg Greenberg who writes about mutual funds and ETFs for the Street.com. He's a very nice guy and he's quite funny. I don't expect that anything will come of it but it was neat to see the office and meet him. He seemed particularly curious about something I said about having finished the quarter with 10%-15% in cash in client accounts. He kind of joked that I had too much cash. I think this speaks to a philosophical difference between me a lot of other people he speaks to and I think this is important for people that manage their own money. You don't have to be 100% invested if you have some short term concerns. I feel no need to manage for my legacy. Many managers do. If your gut tells you that risks are heightened it is ok to have more cash built up. If you turn out to be right, great. But if you turn out to be wrong, learn from your mistake. If you can keep up with the market with your entire portfolio but always maintain 10%-20% cash I would say that is ideal, don't all managers say they try to beat the market with less risk?
Recently a reader forwarded an article about several US companies that are setting up new facilities in Ireland. I have been writing about Ireland since last fall as being an important economic destination. This is only going to become more commonplace which I think will continue to make Ireland an important investment destination. I have no link for the article because the reader copied it from Reuters and emailed it from the brokerage firm he works at.
Lastly a word about terrorism. A few weeks I wrote that terrorism was back on the table in a piece that was to serve as a prep for a CNBC Asia interview. I suggested that capital markets are not afraid of single strike non-nuclear attacks. While I don't think that analysis was particularly insightful it is proving out to be true. The market only fears the unknown. This is crucial to remember.