Monday, December 16, 2013

Good news was good today

Today the market took some good news on the German economy as good news and ramped higher without much let up all day.

Again, most market observers expect the Fed to stand pat at the December meeting on Wednesday.  I put the likelihood of news about the beginning of the end of stimulus at 35-40% which is higher than most.  The current assumption is when this word comes out the market is set to give up meaningful gains.  Remember in July, the rumor of a "taper" cut 10% off the market.  However, it's worth keeping in mind that the market might just decide that the taper is good news (they'll only taper when the economy is really taking off, right) and that might cause stocks to rise.  That would be a contrarian view, but it's not out of the realm of possibilities.

Reminder that it's a traders market that the buy and hold player just visits:  While the markets have had a great year up roughly 20%, if you had perfectly timed the S&P 500 this year (buying each bottom and selling each top) you could have turned $1,000 at the beginning of the year into a measly $264 billion.

While we're on the subject of extremely long odds and billions of dollars..... here come the SUPER, MEGA, GIANT, POWER, HAPPY, TERRIFIC BALL lottery stories because they are easy to run.  Find lines of hapless people that could have used my old venture - NNY Math - and ask them "WHAT WOULD YOU DO WITH $550 million???" 

Okay, so just to be clear no one ever takes the annuity (because tax rates are probably going up not down on the ultrawealthy), so the real lottery number is $290ish million.  Taxes will take another 40% of that number so the real number is probably closer to $175-$180 million.  "Hey, I'll take it you say" and sure that is a boatload of cash, but one news clip I saw today said "and you could even fly in your new $65 million jet."  Ummm, no.  $180 million is big money but it's not private jet money.  You need to have 50-100 times that number to feel comfortable spending on a large private jet.  Then we get to the odds.  It's not a coincidence that no one has won the lottery since the rules were changed.  By my calculation the odds are now 1:258.9 million.  Those are not good odds. 

On my first day of my first job post college, the CEO of our bank visited my office and told all of newbies that avoiding the lottery was the best advice he'd ever received.  I pass it along whenever I can.  Having said that, if I win my next post may originate in Kona, HI where it never gets to -10F :)

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A noted fundamental analyst today published a paper that stocks are priced to return "basically 0% for the next 7-10 years".  While I find that to be an extreme view and as I mentioned above you can still be plenty profitable trading flat to down markets, this does fit with my view of the first quarter century for the US.  I believe that we are following a similar path to the Japanese economy and that we may find ourselves in 2020-2025 looking back at 2000 the way the Japanese look back at the good old days of 1989.

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Random map of the day
via @amazing_maps

 

I'm not really sure how they calculated popularity (I know the Yankees and Red Sox are popular in the northeast but more popular than American Football?), but it should give you a little appreciation for the importance of the 2014 World Cup to the rest of the world.

Cheers!

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