US consumer sentiment and housing numbers are positive. Yet the number of people on food stamps is at an all-time high.
I don't expect a rally through the end of this year. A few reasons for this:
1. US economy is doing well, but the there are many geo-political issues still unresolved.
- Look at the price of Brent, the price movement has been timid, while issues in Middle East still linger (Iran, Syria, Egypt, Libya, oil production is far behind pre-Arab spring levels).
- Europe, pundits have turned neutral on the EU crisis. However, has anything meaningful been done besides giving Spain and Greece another blank check? This crisis will rear its ugly head again, perhaps not as drastically as it did last fall, but concrete solutions are still not on the horizon.
2. US elections...
- Fiscal cliff
- Another standoff between our political parties would put the breaks on the indices. Prime time till the global economic numbers to finally jolt us back to reality - the world markets are not doing well.
My plays:
- Long volatility
- Short Biotech, Tech and Media stocks. Huge run-ups in these sectors (won't take much to knock them down from their lofty perch.
At the very least I would advise investors here to start purchasing some insurance. While I would usually advocate GZ's strategy of writing calls, but with the volatility premiums as low as they are, I would even try buying some puts.
I am not saying that we're in a bear market, we may have some room to run. But come election time, I would have most of my profits safe in hand or insured. |
