Count Your Blessings
Summary
- For equities, it has been "up, up and away." The plays for appreciation in general have been serious winners. However, some trepidation may now be required.
- For those of us also needing cash flows and income, the gods of the marketplace are not being as kind.
- Some exchange-traded funds and some closed-end funds have been the backdoor to relief, for yields and cash flows, but they are complicated securities and not for the uninitiated without some professional help, in my opinion.
| Index | Last 12 Months |
| DJIA | +42.79% |
| S&P 500 | +47.71% |
| NASDAQ | +62.26% |
*Data according to Bloomberg
As we have emerged from our medical pandemic, we have also emerged from our financial pandemic. For equities, it has been "up, up and away." The plays for appreciation in general have been serious winners, and we should all say, "Thank you" to the gods of the marketplace and count our blessings.
"With the Hopes that our World is built on they were utterly out of touch,They denied that the Moon was Stilton; they denied she was even Dutch;They denied that Wishes were Horses; they denied that a Pig had Wings;So we worshiped the Gods of the Market who promised these beautiful things."- Rudyard Kipling, The Gods of the Copybook Headings
It must be said, in the equity markets, that wishes were granted. Now, amidst the froth in valuations, the trillions of dollars rolling out of the Fed, the swagger of Robinhood and his merry gang, the burgeoning world of SPACs, the casinos established for Bitcoins, the euphoria in the Reddit chat rooms, the money flowing out of bonds and into stocks, some trepidation may now be required.
Not panic, mind you, just some commonsense breathing techniques when at these lofty altitudes. During my 47 years on Wall Street, I have been here before, and I know when it is time to take a breath.
For those of us also needing cash flows and income, the gods of the marketplace are not being as kind.
| Index | Yield |
| U.S. Governments | 0.948% |
| IG Corporates | 2.175% |
| High Yield Corporates | 3.988% |
| MBS | 1.682% |
| Municipals | 1.045% |
*Data according to Bloomberg
Nowhere to run. Nowhere to hide. Thanks to the largesse of the Fed and the world's other central banks, any sort of yield has vanished into thin air as the central banks inflated their balance sheets and created a "borrower's paradise" and, at the same time, created a "fixed income investor's hell." What has been a godsend for the world's governments, borrowing for less than nothing or about nothing, and for the ganders in equities, has been bad for the gooses in bonds.
Some exchange-traded funds and some closed-end funds have been the backdoor to relief, for yields and cash flows, but they are complicated securities and not for the uninitiated without some professional help, in my opinion. Further, they are dividend payers, which can get changed in the blink of some Board of Directors' eyes, and this must also be appreciated. However, the risk/reward ratio is correctly calibrated here, in my estimation, and when bonds no longer serve their purpose, then other answers must be found, and so I went out and found them.
"As I pass through my incarnations in every age and race,I make my proper prostrations to the Gods of the Market Place.Peering through reverent fingers I watch them flourish and fall..."- Rudyard Kipling, The Gods of the Copybook Headings
So, today as I remind you to count your blessings, I also remind you to add up the risks. The gods of the marketplace are a frivolous lot, and they can reverse the course on you, just for the joy of doing it. When Robin Hood is meandering about, never forget the Sheriff of Nottingham. No one has defunded that policeman.
Original Source: Author
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
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