The Rally Apologista's Handbook

I’ll not pretend to have a strong opinion about which direction the markets are headed over the short-term, I’ll only tip my hand enough to say that I’m staying prepared to pounce on either outcome.  If this sounds wishy-washy, try to understand that I have zero interest in “making the big call”, I simply want to stay pragmatic and flexible.

With that out of the way, I see a great many Wall Street professionals lately who have found themselves in the role of “apologist” for the 8 month rally, almost as if they feel the need to make excuses for being long and playing the upside given the headwinds we all know face us in 2010 and beyond.

If your professional or emotional circumstances ever happen to put you in the position of playing apologista for the rally, here are a few pointers for overcoming the conventional bear case arguments:

The Rally Apologista’s Handbook

“But the volume is lower than in previous years”

You say:  Its time to forget about the volumes we saw during 2006, 2007, 2008.  Hedge funds and prop traders will never have access again to the amount of margin that was once freely offered by prime brokerages and investment banks. 

“But the volume has declined since the summer/ early fall”

You say:  Sure, because no one is in the mood to risk the percentage gains they have on the books until the calendar turns to 2010.  How refreshing it is to see people acting responsibly with Other Peoples Money, even if they’re abstaining from trading for selfish reasons (performance bonuses locked in).

“But taxes must be raised next year/ tax incentives will run out”

You say:  The removal of fiscal policy may be likely, but the bears argue that incentives like “cash for clunkers” haven’t helped anyway.  Plus, in the 90’s, Clinton and Greenspan worked under a tacit agreement – the White House kept taxes just high enough to compensate for Greenspan’s moderately low rates.  This worked pleasantly for the markets – until the Long-Term Capital meltdown sent the Fed into Plunge Protection mode.  Maybe elevated taxes aren’t the end of the world, as unpalatable as they sound.

“But the worst stocks like AIG and Fannie Mae seem to be leading the markets”

You say:  I don’t know if they are leading, although they have made some huge gains.  But you can’t have this discussion without mentioning the fact that they were the most crushed stocks going into the rally’s start, some of these names were down 95% from their peaks and probably would’ve gone to zero absent the government’s (ludicrous and illegal) intervention.  They only seem to be leading because of how down-for-the-count the shares were to begin with.

“But insiders are still selling, they are closer to the companies’ prospects than anyone”

You say:  I have never seen a shred of concrete evidence that shows me that corporate insiders as a group have any edge whatsoever in terms of the timing of their stock buys and sells.  In fact, you could make a case that they are in the middle of the forest and can only see the two or three trees immediately in front of them.  Plus, I didn’t see any abnormally high spike in insider sales during the fall of 2007, nor was there a rush of insider buying this past February or March.  Corporate boards actually suck at timing their own stocks, look at the vast failures of S&P share buybacks.

“But interest rates must be raised”

You say:  True, and this will mean two things…one, that the markets and economy are no longer on the brink and secondly, just imagine the effect on stocks when all that money in the bond market (from a a total of $67 trillion-ish) comes rushing out, looking for a home.

“But Commercial Real Estate is the Next Shoe to Drop!”

You say:  Yeah, so this “shoe” has been hanging over our heads for so long, I’m starting to think that maybe it’s been amputated before it’s had the chance to drop.  It will be ugly for the most leveraged among us, as usual, but there is also a tremendous amount of cash lurking out there, waiting to strike.  As a prominent real estate mogul with several decades under his belt recently told an audience in NYC, “Kings will be made in the next few years.”

“But unemployment will remain elevated for quite some time to come”

You say:  Congratulations on inventing a time machine that has allowed you to predict with utter certainty that there will not be any new companies/ industries coming out of the woodwork to take advantage of our high capacity labor pool.  Did anyone think a coffee chain like Starbucks was going to come out and hire 135,000 people in the US beginning in the midst of the last recession?  Did you predict the 25,000 or so new employees Apple would hire in America to help it take over the entire personal technology industry?

“But Healthcare/ Energy Prices/ Aging Workforce will bankrupt the nation”

You say:  As we speak, there are brilliant and clever people working on ideas and business models to address all of these issues and others.  Human beings have always adapted to difficult circumstances, and American human beings happen to be better at this than any collective in world history.  And of course, money will be made in the solutions, because in addition to being innovative, we are also bourgeois pigs who expend every last braincell looking for the next opportunity to provide for our own vanity and comfort.

I hear and read the same scary statistics every day just like everyone else and I certainly try to keep an eye on the exits.  But the quote screen doesn’t lie, so I apologize for staying in the game and these are my excuses.

Mea culpa.

 

Tags: , , , , , , ,

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web
  1. خرید فیلترشکن commented on Sep 10

    vpn ایفون

    Hey there, I believe your site might be obtaining browser compatibility troubles. When I appear at your internet site in Safari, it seems to be fine but when opening in Internet Explorer, it has some overlapping. I just desired to give you a swift head…

  2. sexawy commented on Sep 11

    sexawy

    […]Here are several of the websites we recommend for our visitors[…]

  3. farming simulator 2019 mods commented on Sep 12

    farming simulator 2019 mods

    […]Here is a great Weblog You may Obtain Intriguing that we Encourage You[…]

  4. FS19 mods commented on Sep 12

    FS19 mods

    […]one of our guests not long ago suggested the following website[…]

  5. Stepfamily Porn Online commented on Sep 14

    Stepfamily Porn Online

    […]always a major fan of linking to bloggers that I adore but don’t get a whole lot of link like from[…]

  6. mtproto تلگرام commented on Sep 14

    vpn ایفون

    Greetings from Colorado! I’m bored to loss of life at operate so I made the decision to browse your internet site on my iphone for the duration of lunch crack. I truly like the details you provide here and cannot hold out to consider a look when I get…

  7. houses for sale in downey ca commented on Sep 16

    houses for sale in downey ca

    […]the time to study or take a look at the material or internet sites we’ve linked to beneath the[…]

  8. Dolce and Gabbana commented on Sep 16

    Dolce and Gabbana

    […]Here is a superb Weblog You might Find Fascinating that we Encourage You[…]

  9. Jimmy Choo commented on Sep 17

    Jimmy Choo

    […]although internet sites we backlink to beneath are considerably not related to ours, we really feel they may be actually really worth a go via, so possess a look[…]

  10. Givenchy commented on Sep 18

    Givenchy

    […]here are some links to websites that we link to mainly because we believe they may be worth visiting[…]

  11. خرید vpn commented on Sep 19

    vpn ایفون

    below you will occur throughout the hyperlink to some internet-internet sites that we take into account it is greatest to pay a visit to

  12. خرید اکانت وی پی ان commented on Sep 20

    vpn ایفون

    I do not know if it’s just me or if maybe absolutely everyone else encountering issues with your internet site. It appears as if some of the composed textual content in your posts are managing off the display screen. Can any person else you should rema…

  13. Mobile app development commented on Sep 20

    Mobile app development

    […]please go to the internet sites we stick to, which includes this a single, because it represents our picks through the web[…]

  14. خرید vpn commented on Sep 21

    vpn ایفون

    Hey there! I recently saw your internet site and I surely enjoy it. I adore to communicate about omega xl sometimes. Good to be around, many thanks a great deal!