When we came into the month of October, sentiment was atrocious pretty much everywhere. I was down in the dumps just like almost everybody else. I collected all the awful economic things we were hearing about and plowed them into one gigantic post, Season of the Witch. The market hit it’s low for the month that day and hasn’t looked back. All of the problems I listed are still with us, pretty much – what’s changed is that the market has begun accepting and processing them. Earlier this week our inputs flipped and we began buying for the first time in awhile. For me, it’s been an exercise in respecting what the market is telling us rather than what my gut or my emotions may say. I’m not much good at this, but I’m working on it.
Anyway I talked about our new buys on TV this past Tuesday, Barry has a post up going into more detail…
This week, I made several changes in the Core Asset Allocation model, adding several new names and increasing our exposure to equities. And, we did that by reducing our cash position significantly, rather than selling bonds.
Recall back on August 1, we sold emerging markets, technology and small cap positions. There were a variety of reasons why, detailed in There’s Something Happening Here.
Since then, I have been patiently waiting for an opportunity to redeploy that capital. The trader in me wanted to get long for a quick pop, but . . . there is a huge difference between managing people’s retirement money, and swinging cash around for short term P&L.
I insist on something beyond a mere gut feel (i.e., blink-like recognition). I need some hard data to confirm that the buys are a high probability trade, and by last Friday, we received it.
Read the rest below: