Agnostic Optimist

In early October I screwed up my courage and went long by covering my shorts and buying more of my beloveds. It turned out we had a good month, posting a gain of almost 8%. Ending up to be down 3% for the year.


October 17, 2011

We live in a market world tortured by insane volatility. The S&P 500 (still the benchmark index for the world) swings 2–4% in an hour on a flimsy newspaper story; imagine what would happen if we got real news that was truly good or very bad. One of our correspondents maintains there is now a $500 billion short position in risk assets concentrated in European paper that could panic triggering an explosive melt-up. On the other hand, a trip back to the 2008–2009 lows is not inconceivable. As investors, we have to control our emotions and not be whipsawed by these violent, momentum-driven market spasms.

Every sophisticate I have talked with over the last week is looking for a pullback in the U.S. and European equity markets. Their view is that the rally from the lows of three weeks ago has reached its “bridge too far,” and most have either reduced risk in their funds or plan to cut back. They are convinced that expectations for a Grand European plan in the next few weeks are wildly optimistic. It’s a hard argument to deal with because although the European Authorities may come up with some bandages to stop the bleeding, in the long run the ...

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