Daily Market Update – March 10, 2014 (9:30 AM)
Even though I know that hoping for something to happen doesn’t have as much power as I might like, that doesn’t stop me from continuing the process.
Following weeks in which I’ve had a fair number of assignments my hope is usually for a lower open on Monday and maybe finding an opportunity to pick up some replacement positions as they’re (hopefully) on temporary bargain status.
The pre-open trading to begin the week looks as if it’s going to offer one of those opportunities, which haven’t been very frequent, but weighing on the markets is still the situation in Crimea.
While there’s not likely to be a substantive longer term impact from most likely outcomes from the area, there’s no doubt that a short term impact can easily come and it can come with no notice. Rarely is there the simple courtesy of being given advanced notice, although after the fact many will point to the signs that predicted the unpredictable.
Looking at the mildly declining prices that appear set to begin the trading week it makes me wonder more than usual whether they represent an opportunity or a trap. EIther of those is only possible when you have spare money in hand, so there may be advantages to not being burdened with that state of liquidity.
There’s no doubt that erring on the side of caution has exacted its own price as we celebrate the 5th year of the inflection point as the market turned around from its 2009 lows. Pardon me for mixing Latin and French phraseology, but It has really been as if Mardi Gras’ sine quo non expression “Laissez les bons temps rouler,” has been in force non-stop since then. Having been to New Orleans on multiple occasions no one can keep up that level for more than a few days, but the market has done so for 5 years.
Whatever cautionary note may be struck today could easily have been struck a year ago, which is about the time that I started feeling the need to develop cash reserves and the related need to spend down those cash reserves.
In addition to continuing concern over events there is new news from China that their economy isn’t as strong as we had recently believed it to be, after already having factored in a less robust economy. Japan wasn’t much better, but our expectations there have been low for 20 years.
So with the week starting with expressions of economic weakness and continued international uncertainty, I’m less inclined to spend money this Monday morning as I would have anticipated while tallying the previous week’s results just a few days ago.
This is another week that has a number of positions going ex-dividend and already has a good representation of positions with contracts expiring. Hopefully, some of those positions will be assigned and others rolled over to keep the process going and going.
But because of some concern about the potential for weakness this week there may be reason to look for expirations next week or even further for any new purchases considered. Of course, that is still tempered by the realization that time isn’t as valuable as it used to be back in the good old days when volatility was a reliable partner in creating profits. Sometimes when looking at the paltry marginal premium received for each additional week of time it’s difficult to justify tying up a position when the past 5 years has shown a market that just proceeds higher.
I’m currently at approximately 42% cash and was willing to get down to 25%. I don’t believe that I’m now willing to get to that level and will again try to focus on lower beta, and where available, dividend paying positions, for the week.
As always, events and sentiments can and do change so quickly.
Hopefully, they will.