Another day, another day of round of hammer and tongs budget talks in Washington holding both a nation and its stock market hostage. Compare that to the double-digit give backs in Spanish and Italian stocks this month and suddenly treading water makes U.S. stocks a huge outperformer.
While self-admitted hyperactive trading types like Macke salute the S&P 500's "resilience and refusal to sell-off" in the face of numerable headwinds, he also sees a benchmark that is stuck in a 7% range. And you know what? That's just "not worth trading," he says.
Whereas gold or the GLD ETF (GLD) is, or at the very least, clearly worth holding on to, which is exactly what the former Minnesotan is doing. "Gold is working and I still love it," Macke says, while conceding that it is also extended and will leave you late to the party if you are just showing up to the precious metal trough today.
If you are already in gold and looking for an alternative or additional anti-dollar strategy, the Swiss Franc (CHFUSD) is worth a look, even though it too is at a record level versus the dollar.
Meanwhile, in the swirl of synapses that is my brain, disgust with all things Washington has me looking to Europe today for another reason: Borrowing costs. The Italian 10-year note pushed above 6% for the first time since they threw the Lira overboard. For comparative reasons, in Moody's-speak, Italy is currently Aa2 while the U.S. is AAA, but both of those ratings are on thin ice. But what struck me is that market rates move long before policymakers do and the impact is immediate.
Imagine how the debt talks in DC would look if our borrowing costs/interest expense just doubled?
Well, according the US Treasury, in the first 9 months of this fiscal year we have spent $385.7 billion dollars in interest costs alone. If you annualize that, it works out to $514 billion for the full year, which would be a 24% increase from the $413.9 billion in interest we forked out last year.
Statistically, the average rate on that debt is actually down year-on-year, but again, that is market forces at work (think: flight to quality) and not a standing ovation. And there are already signs out there that show the loyalty and demand for our treasury auctions is coming off bloom.
So even though the Washington Post today refers to the the debt and deficit crisis as an "accounting concept" rather than a scary monster under the bed, I tend to have a slightly (okay dramatically) different view.
Speaking of monsters, there are two that came to mind today worth noting in investor circles:
First, Harry Potter did it again and broke its own and everyone else's weekend box office records with the boy wizard hauling in more than $160 million already. And that's the point, it's the gift that keeps on giving. And even if you're a Potterphobe like me, you need to genuflect and honor that river of money.
The second monster I flag is Pfizer (PFE), with a 4.1% dividend yield and an unusually bold call today to ''aggressively buy it under $20" by Ticonderoga Securities. Godspeed with that but bravo! for your boldness.
What's on your mind? Do you think we're still range-bound in stocks? Would you dive in to gold here? Is the Swiss Franc too out there for your taste?
Let it rip in the comments section below... send an email to Breakoutcrew@yahoo.com or follow me on Twitter @MattNesto
- S&P 500
- flight to quality
- stock market
- did it again