Why go long stocks now?
We discussed this very question today as we began to execute the BIG list on the last post. The following chart looks awful but is a great technical justification for buying.
The scale for the two indices is awful. But it is a quick and dirty chart that shows as the VIX declines the S&P500 increases. Statistical analysis aside, it serves to support a buy posture. Certainly we have written how emotions and beliefs cannot guide us. We are professional investors. Although the daily news seems awful and causes us to doubt investing, quantitative analysis helps keep us on track.
The VIX is an indication of risk or fear of risk. As risk fears decline the premium on the index declines. Thus market volatility or price uncertainty and "sketchy" behavior should decline. This is in no way a certain indicator of the future market direction. We did not need to do extensive statistical analysis to determine market direction. We have little interest in a market that increases or decreased in value. We make our money on capturing dividends and premium. The best market for us is a sideways or static market. No doubt we would like an upward trending market, but it does little for except make the overall market investors feel good. It is nice to feel good, but only as a confidence booster. Our responsibility is to keep our eye on the prize and work hard to meet our clients expectations.
Other reasons to own stocks:
Earnings are near historic highs! Now I do believe there is inflation out there, however, we are in a massive recession and earnings are outrageously high. Seems like some politician will want to smack corporations with more taxes. Too bad dividends are paid after corporate taxes are calculated then the precipitant if they are subject to dividend tax also pay tax on their income. Thus the old double taxation argument..
We discussed this very question today as we began to execute the BIG list on the last post. The following chart looks awful but is a great technical justification for buying.
The VIX is an indication of risk or fear of risk. As risk fears decline the premium on the index declines. Thus market volatility or price uncertainty and "sketchy" behavior should decline. This is in no way a certain indicator of the future market direction. We did not need to do extensive statistical analysis to determine market direction. We have little interest in a market that increases or decreased in value. We make our money on capturing dividends and premium. The best market for us is a sideways or static market. No doubt we would like an upward trending market, but it does little for except make the overall market investors feel good. It is nice to feel good, but only as a confidence booster. Our responsibility is to keep our eye on the prize and work hard to meet our clients expectations.
Other reasons to own stocks:
No comments:
Post a Comment