Before venturing into one of my favorite topics, “Earnings Season”, I thought it might be useful to explain my reason for creating kortsessions.com. I started my blog to offer a sensible counterpoint to the 24/7 media/ political/ punditry cycle and its continuous barrage of bad news, misinformation and fear mongering. Most of this is noise, doing more harm than good, creating irrational fears and expectations. My goal is to bring investors in off the ledge with the common sense application of the perspectives that I have gained over during my 42 years in the investment industry. To that end my posts will deal with historical market perspectives that might shed light on what investors face today. In other words we may not have a specific axe to grind versus the media, just some thought process to help improve your view of today’s market situation.
Today’s session will have a bit of both.
“Earnings Season” is high on my list of harmful, media-coined terms specifically designed to create interest and drama in a period that should not be that dramatic or interesting. Unlike normal seasons coming once a year, we get “earnings season” 4 times a year; each representing an opportunity for the media to create fear, controversy and angst among those that heed their pronouncements.
Now, “Earnings seasons” are for the most part are noise because they focus on short-term data points, rather than the long-term prospects of an enterprise. Even though for most people this should be noise, because of the of their hyper-focus on short-term investment performance, most analysts and money managers really do care about these quarterly reports. I believe that this focus on the short-term (beating the other guy to the punch) is a primary cause for the continuing inability that many money managers have had in outperforming those indices to which they are benchmarked. Conversely, individual investors who don’t have to be right (right away), have a real advantage versus the pros. You can buy out-of-favor investments without fear of losing your job. This is a real leg up on most institutions who sometime need iron-clad proof, regrettably at the cost paying much higher prices, before they commit to a name (i.e. the name has to get back in favor).
Here is a little sampling of pre-earnings-season rhetoric from our oft-quoted, CNBC friend, “The Bad News Bearer,” Jeff Cox , who will give you his pronouncements on Q2, 2013 earnings season at the end of the attached video clip…”a trainwreck.” …”not a pretty picture.” Maybe he ‘s right this time. A stopped clock is right at least twice a day.
Although Jeff Sommer’s Strategy column in this Sunday’s New York Times (“Tremors From the Fed’s Great Experiment”) features a likeness of Ben Bernanke in a poster, posed like and visibly similar to a poster image of that late, great communist V.I. Lenin, and despite the title noted above, the attached article is a pretty good post-mortem on last week’s activity in the bond market. I am not sure that I would agree with the concluding paragraph below.
“That’s why any effort to time the market — to truly anticipate the Fed’s moves, and the shifts in interest rates — is inherently dangerous. “Bonds are intended to be a buffer in a balanced portfolio, along with stocks,” Mr. Kinniry said. Holding on to bonds while yields rise and prices fall may be very painful, he said, but it’s still worthwhile. “Even at times like these,” he said, “it’s important to stay the course.”
Even with the 10-year at a 3.5% yield (it is only 2.5 % A/O 7-1-2013), stocks with 2% to 3% dividend yields would still look like a better deal to me.
What do you think?
The information presented in kortsessions.com represents my own opinions and does not contain recommendations for any particular investment or securities. I may, from time to time, mention certain securities for illustrative purpose, names where I personally hold positions. These are not meant to be construed as recommendations to BUY or SELL. All investments and strategies should be undertaken only after careful consideration of suitability based on the risks, tolerance for risk and personal financial situation.