Investment Commentary, Joe Kain

Sunflower Asset Management, Inc.

Investment Commentary

March  2012

 

“Calm Waters”

I am not a superstitious person, so I am not afraid of jinxing us by referencing “calm waters” for stocks. The market is performing well, and is a welcome respite from the nasty volatility that has all too often characterized the past decade. While recognizing the scars are still there, it is important at this stage to be forward looking. We have been run over by a truck, so it is only natural to look over our shoulders for the next eighteen wheeler.

The recent market strength has been justified by a backdrop of overall decent fundamentals. The improving metrics as usual are being ignored, or dismissed out of hand by the skeptics.

Anyone who attempts to identify and articulate the positives is accused of being naïve or simplistic. Optimists supposedly just are not sophisticated enough to be cognizant of the negatives.

Well reasoned analysis does take into account such negatives as a slowing China; European debt woes; escalating oil prices; a potential military strike on Iran and so on. But that does not mean the positives cannot gain the upper hand and the market cannot go higher. And so far this year it has.

The negative case is overly documented in the media because it sells. It has more sizzle. It sounds more enlightened.

Human nature, with its fears, insecurities, anxieties, etc. make it susceptible to the attractiveness of the theoretic doomsday scenarios regarding the stock market.

However, the stock market itself ultimately goes its own way, disregarding human emotions and fears. The market moves in time based on cold blooded fundamentals.

“Mr. Market” plays upon human nature in the short run, fooling people into mistakes and ill advised moves. Sins of omission are one example such as “being in all cash waiting for things to settle down.”

The time to turn cautious (yes, even fearful) is when the masses turn bullish. That indicates that most folks are fully invested, so there is no additional cash to fuel further gains.

The good news is we are a long way from that stage. There is a mountain of idle cash that will jump on the market bandwagon over time. So there is plenty of investment capital available to fuel more gains.

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Oil prices should start moderating a bit as Saudi Arabia reassured customers they will up production to cover any loss of Iranian oil.

Ten years from now how many folks will be able to cite the current negatives that are being purported as to why stocks cannot go up now?

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“You can have cheap equity prices or good news, but you can’t have both at the same time.”

Joe Rosenberg

Barron’s 12/5/11

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“Sentiment is so bad about the prospects for sustainable growth in the world economy over the next ten years that people are willing to pay the U.S. Government to borrow their dollars.”

Robert Horrocks

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“Too many people spend money they haven’t earned to buy things they do not want, to impress people they don’t like.”

Will Rogers

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“Rudeness is the weak man’s imitation of strength.”

Eric Hoffer

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Joe Kain

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