Beware a stocks snakebite
by Peter Switzer
A lot of city slickers have an enormous yearning for life in the country, and it can be ideal, but the fairy tale can come to a screaming halt when urban cowboys learn they have to live with snakes. Snakes can ruin the bush escape, but I hope it doesn’t crush my idyllic dream for stocks this year.
In case you missed it, I expect a pullback some time — I dunno when — and that’s because we’ve gone up so hard since mid-2013 with gains over 20 per cent. However, this is the Year of the Snake in the Chinese horoscope, or is it ‘horror-scope’?
Art Cashin, UBS’s floor guy at the New York Stock Exchange, who I interviewed a couple of years ago, pointed out to CNBC that a few “spotty events” have happened in the year of the snake.
Like what? Well try these — 9/11, Pearl Harbor and wait for it, the Crash of 1929!
Back to the future
Now I always respect history, but I’m never a slave to the past when trying to make out the future.
I have to say I’m concerned that the Chinese are very respectful of the Asian zodiac, and they can be superstitious, or at least the ones I know, so I’m not ruling out the possibility that the year of the snake could ruin the stocks party I’m planning for.
Against this, I prefer to base my investments on more substantial reasoning than what a horoscope predicts. Markets have fallen in the year of the snake, and Wall Street copped it in 1965, 1989 and 2001, but in each of these cases market valuations were high and above their long-run trend. Recall 2001 was the end of the dotcom era where valuations really got out of whack.
Market is cheap
Right now, despite a big surge for stocks, the experts still say the market is cheap. The US market is 18 per cent below its long-term trend and we know what a leader Wall Street is for our market. And don’t forget our market is up less than 60 per cent since the GFC crash, while the Yanks are getting close to getting even on those losses.
Sure, China could see the Shanghai Composite pullback, like other markets, as it has surged since 3 December close to 20 per cent, but it had slumped by a similar amount over a lot of 2012.
To call markets as well as I can, I have exposed myself to a hell of lot of insightful work by historians, economists and market players, but I’m going to pass on the Asian zodiac and reptiles for 2013!
Gee, I hope this doesn’t come back to bite me!
(By the way, the Dow was down 21.73 points or 0.16 per cent to 13,971.24 while the S&P 500 lost 0.92 points to end at 1517.01 with no snakes in sight apart from some players in the market, who have to be watched.)
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Published on: Tuesday, February 12, 2013
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