A Letter To Santa
December 12, 2012 2 Comments
First, I would like to thank you for last year’s gifts. I remember how the bears wanted to ruin your arrival. Thank you for coming on time as the rally out of the mid-December lows was quite spectacular. I will never forget the Grinch’s green face when you rallied the markets well into early spring. It was hilarious to watch those gloom-and-doom crowds staring at the winter wonderland in awe and disbelief. “Blast this Christmas music. It’s joyful and triumphant,” said the Grinch.
Here we go, one year later and once again very few people are waiting for your arrival. In fact, not much has changed since last year. Despite the markets behaving quite well throughout the year, the litany of problems and worries has grown even longer. As you have probably heard, this time the so-called “Fiscal Cliff” tops the Grinch’s charts. It is not that other “excuses” to stay out of the markets have been worn out; people still worry about Europe, the deficit, wars, unemployment, etc. I have to say the Grinch has been quite effective in spreading the bad news and keeping investors away from stocks.
“I must stop this Christmas from coming… but how? I MEAN… in what way?” - Grinch
The mid-November decline was a brilliant move by the Grinch. It didn’t matter that the markets have already moved back above their rising 200-day moving averages. It didn’t matter that the markets failed to succumb to any selling pressure despite the lack of a deal from Washington. Everyone has been so occupied with bad news that the market’s preparation for your arrival went unnoticed. It was almost as though all the re-test, base building and consolidation work hadn’t happened.
In fact, the Grinch’s bearish propaganda has been so strong that even the arrival of a new 105-day cycle also remained unnoticed. The recovery rally from the mid-November lows has been impressive and all true believers in Christmas have noticed the change in the markets.
I wonder what you will carry in your bag this year? If history is any guide your bag is probably going to be much heavier. Last year, you had lots of Industrials and Technology. This time you are most likely to carry some heavy Metals and Rocks. This will require gallons of Energy, which you will find plenty of in Toronto.
Don’t worry about lack of excitement. I am sure once you arrive and move into the New Year all those grumblers will have to act. After all how long can they stay in bonds? I am sure that all the money that is parked there should eventually find a way to welcome you. If history is any guide, by early spring you should have quite a following.
For this holiday season, please bring me some joy, especially here in Toronto, where the Grinch and his pack of bears have been ruling for too long. I have already made some preparations and bought some selective names in late-cycle performers such as Consumer Staples, Energy and even some Golds. I noticed that your elves and helpers have been secretly preparing the groundwork for your arrival, bringing with them the beautiful base-building patterns in some stocks such as Husky Energy (HSE-T) or Quanta Services (PWR-N). I don’t want to ruin your surprise, so maybe I will write more names in the upcoming letters.
Yes, I remember what you said last year: “You should always be ready for the possibility that my sleds may break down or one of my reindeers may get injured.” Don’t worry; I am watching my stop-loss orders carefully.
Can’t wait to see you.