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There’s no fear anymore – anywhere – and I’m talking about the type of fear that overwhelms investors – and, in turn, the
market. The surest indication of this can be found in the following chart.
So says Louis Basenese, Chief Investment Strategist (wallstreetdaily.com) in edited excerpts from his original article* entitled The Single Most Important Chart for 2014.
[The following is presented by Lorimer Wilson, editor of www.munKNEE.com and the FREE Market Intelligence Report newsletter (sample here). The excerpts may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.]
Basenese goes on to say in further edited excerpts:
As I survey the landscape heading into 2014, there’s no fear anymore – anywhere – and I’m talking about the type of fear that overwhelms investors – and, in turn, the market… Many things that once scared us “stockless” simply don’t exist anymore.
- There’s no fear about a U.S. financial and economic collapse. Banks are on the mend and the economy is actually exhibiting signs of strength.
- There’s no fear about a eurozone crash.
- There’s no fear about a hard landing in China.
- There’s no fear about a debt ceiling default, either. The latest budget deal points to politicians finally working together.
- Heck, even the “fear index” itself – the VIX Volatility Index (VIX) – hasn’t registered a meaningful blip over 20 since December 2012.
That begs the question, though: Without an imminent crisis gripping investors – and no “end of the world” trade being touted tirelessly – what are we to do?…[The] chart [below] contains the all-important answer – and no, it’s not an unabashed bullish call to go “all in” on stocks.
Fear Bubble: Deflated!
Forget about the stock market rising on bubble expectations…it’s rising on the tremendous fear [that the] bubble [is] deflating…The surest indication of this can be found in the following chart [which] shows the spread between high-yield bonds (junk bonds) and super-safe Treasuries of comparable maturity.
After touching a high of 2,180 basis points following Lehman Brothers’ collapse – when outright panic gripped the markets – spreads are all the way down to 411 basis points. That’s more than a full percentage point below the long-term average and the lowest since October 2007.
What does it all mean? As I said before, there’s no fear.
[Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]
*http://www.wallstreetdaily.com/2013/12/13/merger-arbitrage-investing/ (© 2013 Wall Street Daily, LLC. All rights reserved.)
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Great post.
Do yourself a favor and include at least 10% PM’s in your portfolio, which is especially easy to do now that their prices are “artificially” depressed.
Remember, long term what goes up (US$) also goes down AND VICE VERSA (PM)!
Happy Holidays