It's not easy bein' green
Having to spend each day the color of the leaves
When I think it could be nicer bein' red or yellow or gold
Or something much more colorful like that.
It's not easy bein' green
It seems you blend in with so many other ordinary things
And people tend to pass you over
'Cause you're not standing out like flashy sparkles
On the water or stars in the sky
But green is the color of spring
And green can be cool and friendly like
And green can be big like an ocean
Or important like a mountain or tall like a tree
When green is all there is to be
It could make you wonder why
But why wonder, why wonder?
I am green and it'll do fine
It's beautiful, and I think it's what I want to be.
-- "Bein' Green," written by Joe Raposo and popularized by Kermit the Frog (Jim Henson).
The E.U. made some progress last night, and the S&P futures are responding positively now. When I started my trading day at around 3:00 a.m,. EST, however, futures were down by 6 handles -- they are now up by 11. As I have written, it's so sick.
Consider, though, that this volatility that has frightened so many investors and traders might be the precursor of a reasonably strong up move as renters and noncommitted holders have been shaken out.
When the Street is ruled by the fear of uncertainty and wild daily price moves, isn't that precisely the time one should be seeking long-term investment opportunities?
Unlike almost any strategist on Wall Street (and many of the talking heads that are paraded on CNBC), I have been bearish on the market for most of the year -- until recently. I have been keenly aware of the worldwide risks associated with the impact of the current balance-sheet retrenchment and the challenges associated with numerous secular headwinds. Lord knows I have been writing why it is different this time for quite a while. (Screwflation, anyone?)
The world's economic recovery is imperfect, and, with the U.S. economy exhibiting only moderate growth, there is little margin of safety from exogenous shocks. But imperfection and vulnerability are now universally recognized (contrasted with the optimism that existed a year, six months and three months ago) and are arguably reflected and more than discounted in reasonable/current valuations.
I continue to see the potential for a vast rotation out of bonds (which have pint-sized yields now) and into stocks (e.g., the S&P 500 yields more than the 10-year U.S. note).
Equally important, the relative economic and profit position of the U.S. and its large corporations over many other regions in the world favor buying American. And, in the fullness of time, I can see a rotation, too, out of nondomestic stocks into large-cap S&P names.
Yesterday afternoon, I upped the recommended long exposure (from 70% to 80%) for the Kass model portfolio into the market's swoosh lower.
It's not easy to be green, and it is not easy to buy into weakness -- it requires fortitude and level-headedness in a risk-on/risk-off environment. But I believe that buying dips and capitalizing on panics/overreactions will continue to be the ticket to delivering superior investment returns in the months ahead.
Color me more bullish and, as always, opportunistic.
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