Is it alright to rethink, my rethink of my original rethink?
That's a whole lot to unpack! So I have (as per usual) been reading and reading, watching and watching and listening and listening over the weekend in an all out effort to try and get my head around where we are and where we are heading. This kind of plays into the nothing no longer seems the same. I have trimmed some positions only to find myself adding again a short while later. To be honest I probably have too much dry powder right now. To be even more honest it was hard to trim some winners but I thought heading into one of the weakest stretches of the year after a rather significant run up, it was the prudent thing to do. Can't say for sure that was the right call. While we still have a week left in this month and an October that can be nasty, I would have to say, in hindsight, I would have been better off to hold onto positions. Someone, think it was North, as much as said so, far be it for me to listen, dumb As* s. In any event, here I sit at a cross roads with cash (albeit collecting 6 percent) while we continue to melt up to all time new highs, talk about lost opportunity costs.
As I have noted in past posts I am at an absolute ridiculous portfolio overweight now of about 70 percent reits. Shaking my head as I write that last sentance. Talk about conviction...........or stupidity, not sure which. To be fair I have no leverage, zero, nadda and only two smaller buys that are negative and a very healthy 90 percent plus of that are up nice enough right now.
So what gives? Like many I have been so mindful of the U.S. teetering on a recession. How long do you sit on that fence before getting off the proverbial pot? Overall the numbers just kinda keep defying this big slip. Ya ya ya, I know, its coming, just too many signs giving too many signals not to be right? In the meantime, gdp seems solid, employment even at 4.2 is fine, earnings remain fine, guidance remains fine. So how is it with that backdrop, and inflation about where everyone wants it plus the fact we are about to go from arguably quite restrictive on our way to nuetral (call it even 3-3.25 percent) that we don't just continue to grind higher? I feel like productivity is increasing, is it possible we are entereing a new normal for multiples? I have a hard time accepting that however strip out big tech (duh) and the multiple is a lot easier to swallow. Canada being an entirely different animal but so reliant on the U.S. could conceivably step into one or more 50 bip cuts in its upcoming meetings.
I was looking at financials that are breaking out and more as it pertains to Reits, smaller regionals who are also breaking out, the very same sector that everyone was so worried about that is holding all that commercial paper, breaking out! Is nobody worried about the debt wall anymore?
I am/was desperately trying to remain disciplined, keeping a cautious outlook given all time highs in a weak period, which has proven to be...............wrong?? So here is your contrarian play of the year, I am going to try and add back again, that should for all intents and purposes bring the pull back I have been waiting for out in full force once I add some more. They say the hardest time to buy is when it just doesn't feel right, but that is usually a reference to when you are at lows, we are now at highs, which to me seems even harder. There's a real chance I could be quite wrong here and I just haven't been patient enough yet. I guess in the long run however, I like to look at downside risk and that would seem that even if we do go into recession and we do pull back (even prolonged) I think it remains shallow and we then set up nicely for another sizable move higher, in the mean time collecting nice yeild.
I am and probably always will be worried about the U.S. debt load, but like most, have been for years. The market generally doesn't give notice (per say) of when to sell this problem, then its too late.
Talk about a bunch of babbling drivel, sorry. It's Sunday with not too much to do today awaiting the markets to open, think I need another hobby.......................na!
Good luck and stay good,
DZ
I'll add a p.s. here and Frankie and Este will love this. While I still remain closer to bearish office, I will concede, my understanding is that there are a number of larger U.S. cities that are now starting to eat away at the vacancy rates in office buildings. Is this the trough?