Saturday, September 27, 2014
September 27, 2014 Ball of Confusion
Risk/Reward Vol. 237
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
“Round and around and around we go
Where the world’s heading/Nobody knows
Great googalooga/Can’t you hear me talking to you
Just a ball of confusion.”---lyrics from “Ball of Confusion” sung by The Temptations
“Don’t you know things can change
Can you hold on for one more day
Things’ll go your way.”---lyrics from “Hold On” sung by Wilson Phillips
“Give me that old time religion
It’s good enough for me.”---lyrics from “Old Time Religion” sung by Everyone
“Round and around and around we go/Where the market’s heading/Nobody knows.” This week The Dow Jones Industrial Average was down triple digits, down triple digits, up triple digits, down triple digits, up triple digits. Is the stock market just a roulette wheel; “just a ball of confusion”? At first glance the answer appears to be “yes”; but a deeper look reveals that the market’s confusion is justified. Domestically, Mr. Market is struggling to digest the impact of an improving economy and the prospect of interest rates rising as early as Q1 2015. Meanwhile, he must consider the fact that economies elsewhere; notably in China and the Eurozone are staring at sluggish growth in one instance (weak domestic demand for goods and slowing exports in China) and recession in the other (Euro at multi-year low versus the dollar). In response, their central banks are adopting ever more accommodative monetary policies. In short, Mr. Market must determine if the US can continue to prosper and to tighten its monetary policy if the rest of the world’s economies continue to struggle and their banks continue to loosen their purse strings.
The cross currents buffeting the broader market also were felt this week in the income sectors that I fancy. Action on the 5Year Treasury Note exemplified this. On Wednesday, the 5Year experienced a weak auction with low coverage and a low bid, both facts signaling a belief that interest rates likely will increase sooner rather than later. This followed news earlier in the week that the spread on the 5Year Treasury Inflation Protected Note (TIP) was at a multi-year low signaling Mr. Market’s belief (that day at least) that inflation would average only 1.6% annually over the next five years; a situation that augurs against any interest rate increases. Huh? Adding to the confusion in the fixed income world was the shocking resignation on Friday of the Bond King, Bill Gross, from PIMCO, the company that he founded. Much disruption in the fixed income sector is possible in the days ahead as billions of dollars may follow him to his new home at Janus---or not. Through it all, the yield on the 10Year Treasury, to which I attach great significance, traded in a tight range---essentially holding pat; as did I. I bought very little this week. “You know that if you hold on (to your cash) for one more day/Things can change.” Indeed, “they may even go your way.”
In times like this, I seek guidance in “old time religion/It’s good enough for me.” So this week, I re-read portions of Benjamin Graham’s books Security Analysis (first published in 1934) and The Intelligent Investor (first published in 1949). And am I glad that I did. Ben Graham is considered the father of value investing and is remembered as Warren Buffett’s mentor and guru. But he is so much more than either of those sobriquets. If you have not read these, I suggest that you do (and if only one, make it The Intelligent Investor). The distinction he draws between investors and speculators, with the former’s insistence upon the receipt of regular and consistent income, reinforces the conviction I have in my approach. In a world of suppressed interest rates, balance sheets bloated by retained earnings and a love affair with share buy backs, it has become difficult to find solid streams of income. But, the difficulty of the search only makes the discovery more rewarding.
In editing this edition, it reads too didactic. I will resist The Temptation for “store front preachin’” in the future. That said, you may not hear from me for two weeks. I am heading to Italy with “My Girl.” And it is likely that
“I won’t have time to think about money
Or what it can buy
I’ll be a fella
With a one, a one track mind
And if it comes to thinkin’ about
Anything but my baby
I just won’t have the time.”
Saturday, September 20, 2014
September 20, 2014 The Man
Risk/Reward Vol. 236
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
“Yeah, you can tell everybody
Go ahead and tell everybody
I’m the man, I’m the man, I’m the man.”---lyrics from “The Man” sung by Aloe Blacc
“You got me running, muttering, screaming each and every night
Faster and faster.”---lyrics from “Faster” sung by Janelle Monae
“The present has no ribbon
Your gift keeps on giving
We’re up all night to get lucky.”---lyrics from “Get Lucky” sung by Daft Punk
As I have written in the past (see Vols. 174, 205, 217, 220 and 224 www.riskrewardblog.blogspot.com ), “you can tell everybody/Go ahead and tell everybody” that when it comes to gauging the pulse of the Federal Reserve, Jon Hilsenrath of the Wall Street Journal is “the man, is the man, is the man.” And never has his position as the Fed’s designated leak been more on display than Tuesday morning during a webcast that he hosted and that I watched. At approximately 11:15 a.m., he predicted, confidently, that in the statement scheduled to be released the next day at the conclusion of its two day meeting, the Fed would not abandon its promise to forego raising short term interest rates for a “considerable time” after QE3 ends in October (see last week’s discussion). Almost instantaneously, both the Dow Jones Industrial Average (DJIA) and the S&P 500 (which had been languishing in negative territory for days in anticipation of the Fed’s statement) skyrocketed. The DJIA gained more than 100 points in a matter of minutes. Indeed, the release of the actual statement by the Fed on Wednesday afternoon, which confirmed Hilsenrath’s prediction, proved anticlimactic as the markets moved only modestly upward. Assured that the Fed’s easy money policy will remain intact for the next several months, the DJIA continued to cruise upward to new highs on Thursday and Friday.
That said, the Fed’s statement was not all rosy for the easy money crowd. Although Mr. Market has interpreted the phrase “considerable time” used in the statement to mean that short term interest rates will not be raised until mid-2015, the Fed’s statement also contained charts indicating that once rates do begin to rise, the pace will be “faster” than previously anticipated. This news caused “muttering and screaming” among fixed income investors as reflected in the yield on the bellwether 10 Year Treasury Bond which increased on the news, closing Thursday at 2.63% (highest since July 3) and Friday at 2.59%. (Remember a rise in yield means a drop in price.) For those like me who were agnostic as to the Fed’s course of action (since I was 2/3rds in cash), the statement and its impact have helped inform the actions I will take over the next few weeks and months. My read is that, absent exogenous events, the yield on the 10Year will remain range bound between 2.4% and 2.75% into the first quarter of 2015. This read gives me comfort sufficient to reinvest into the full complement of securities that I held prior to liquidating them at the end of July. Assuming my read is correct, these securities should provide me an additional 1 ½ to 2% gain by year end.
With so much attention focused this week on the Fed, Scotland and the Alibaba IPO, it would have been easy to overlook some “presents”, many of which came with “no ribbon.” One such present is a rights offering issued by Gabelli Equity Trust (GAB), market guru Mario Gabelli’s flagship equity closed end fund. Rights offerings (RO) are like secondary stock issuances, but limit the participants to existing shareholders thus reducing their dilutive effect. GAB’s offering has resulted in its stock trading at or below its projected post RO net asset value (NAV) something that rarely happens. This looks like “a gift” which will “keep on giving". I initiated a position late in the week. Sometimes, you don’t need to be “up all night to get lucky.” I also took advantage of a dip in ARCP, the nation’s largest single tenant triple net lease real estate investment trust. For those who want a lesser but more secure return, take a look at its preferred stock, ARCPP. And then there are the oil companies, all of which remain in the bargain bin. A broken record I may be, but one cannot look at the events occurring in the mid-east and the sanctions placed on Russia (the world’s second largest oil exporter) and not conclude that a bet on US domestic oil production, transport and/or supply is a good one. Pick any number of companies in these sectors, and I believe you will be a winner.
And so my search for a reasonable return in exchange for a reasonable risk continues. Earning such a return in today’s zero-bound interest rate environment, created and now perpetuated by the world’s central banks, is not easy. But, like Daft Punk, I believe the following:
“Work it, make it, do it, makes us
Harder, better, faster, stronger.
And work it, make it, do it, I will.
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
“Yeah, you can tell everybody
Go ahead and tell everybody
I’m the man, I’m the man, I’m the man.”---lyrics from “The Man” sung by Aloe Blacc
“You got me running, muttering, screaming each and every night
Faster and faster.”---lyrics from “Faster” sung by Janelle Monae
“The present has no ribbon
Your gift keeps on giving
We’re up all night to get lucky.”---lyrics from “Get Lucky” sung by Daft Punk
As I have written in the past (see Vols. 174, 205, 217, 220 and 224 www.riskrewardblog.blogspot.com ), “you can tell everybody/Go ahead and tell everybody” that when it comes to gauging the pulse of the Federal Reserve, Jon Hilsenrath of the Wall Street Journal is “the man, is the man, is the man.” And never has his position as the Fed’s designated leak been more on display than Tuesday morning during a webcast that he hosted and that I watched. At approximately 11:15 a.m., he predicted, confidently, that in the statement scheduled to be released the next day at the conclusion of its two day meeting, the Fed would not abandon its promise to forego raising short term interest rates for a “considerable time” after QE3 ends in October (see last week’s discussion). Almost instantaneously, both the Dow Jones Industrial Average (DJIA) and the S&P 500 (which had been languishing in negative territory for days in anticipation of the Fed’s statement) skyrocketed. The DJIA gained more than 100 points in a matter of minutes. Indeed, the release of the actual statement by the Fed on Wednesday afternoon, which confirmed Hilsenrath’s prediction, proved anticlimactic as the markets moved only modestly upward. Assured that the Fed’s easy money policy will remain intact for the next several months, the DJIA continued to cruise upward to new highs on Thursday and Friday.
That said, the Fed’s statement was not all rosy for the easy money crowd. Although Mr. Market has interpreted the phrase “considerable time” used in the statement to mean that short term interest rates will not be raised until mid-2015, the Fed’s statement also contained charts indicating that once rates do begin to rise, the pace will be “faster” than previously anticipated. This news caused “muttering and screaming” among fixed income investors as reflected in the yield on the bellwether 10 Year Treasury Bond which increased on the news, closing Thursday at 2.63% (highest since July 3) and Friday at 2.59%. (Remember a rise in yield means a drop in price.) For those like me who were agnostic as to the Fed’s course of action (since I was 2/3rds in cash), the statement and its impact have helped inform the actions I will take over the next few weeks and months. My read is that, absent exogenous events, the yield on the 10Year will remain range bound between 2.4% and 2.75% into the first quarter of 2015. This read gives me comfort sufficient to reinvest into the full complement of securities that I held prior to liquidating them at the end of July. Assuming my read is correct, these securities should provide me an additional 1 ½ to 2% gain by year end.
With so much attention focused this week on the Fed, Scotland and the Alibaba IPO, it would have been easy to overlook some “presents”, many of which came with “no ribbon.” One such present is a rights offering issued by Gabelli Equity Trust (GAB), market guru Mario Gabelli’s flagship equity closed end fund. Rights offerings (RO) are like secondary stock issuances, but limit the participants to existing shareholders thus reducing their dilutive effect. GAB’s offering has resulted in its stock trading at or below its projected post RO net asset value (NAV) something that rarely happens. This looks like “a gift” which will “keep on giving". I initiated a position late in the week. Sometimes, you don’t need to be “up all night to get lucky.” I also took advantage of a dip in ARCP, the nation’s largest single tenant triple net lease real estate investment trust. For those who want a lesser but more secure return, take a look at its preferred stock, ARCPP. And then there are the oil companies, all of which remain in the bargain bin. A broken record I may be, but one cannot look at the events occurring in the mid-east and the sanctions placed on Russia (the world’s second largest oil exporter) and not conclude that a bet on US domestic oil production, transport and/or supply is a good one. Pick any number of companies in these sectors, and I believe you will be a winner.
And so my search for a reasonable return in exchange for a reasonable risk continues. Earning such a return in today’s zero-bound interest rate environment, created and now perpetuated by the world’s central banks, is not easy. But, like Daft Punk, I believe the following:
“Work it, make it, do it, makes us
Harder, better, faster, stronger.
And work it, make it, do it, I will.
Saturday, September 13, 2014
September 13, 2014 Worry,Worry
Risk/Reward Vol. 235
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
“Worry, worry, worry, worry
Worry just will not seem to leave my mind alone.”---lyrics from “Trouble” sung by Ray LaMontagne
“Slow ride/Take it easy
Slow ride/Take it easy.”---lyrics from “Slow Ride” sung by Foghat
“Love til you hate
Know that we all fall down.”---lyrics from “All Fall Down” sung by One Republic
This week’s drop in the stock market resulted from “Worry, worry, worry, worry” that the Federal Reserve (Fed) will amend its forward guidance at its meeting next week. Specifically, the “worry” is that the Fed will announce that it may not wait a “considerable time” (at least six months) after quantitative easing (QE3) ends in October before raising short term interest rates. On Friday one of my favorite market gurus, Mohamed El-Erian, handicapped at 50/50 the likelihood of a change in Fed guidance. As a consequence of this “worrying”, the bond market experienced a sell-off causing the yield on the benchmark US10 Year Bond to climb to 2.61% at Friday's close. (N.B. falling prices mean rising yields). This in turn caused yields to rise worldwide. Stocks took a breather as well, as investors mulled the potential consequences of the Fed’s first rate increase since 2006. As an income investor, thoughts of rising interest rates “will not leave my mind alone”---at least not until after next week’s Fed meeting.
One notable dissenter from the “worry” crowd is Jeffrey Gundlach. If Bill Gross is the Bond King, then Gundlach is the Crown Prince. During his webcast last Tuesday, Gundlach advised fixed income investors to “Take it easy.” He sees no reason for the Fed to change its forward guidance or to otherwise signal an increase in interest rates. He cites the following facts as evidence that economies worldwide continue on a “slow ride” which he believes will grow even “slower” if the Fed even hints of a rate increase next week:
• Wage inflation for the lower 70% of US wage earners is non-existent, and wage inflation is Janet Yellen’s major concern. The prospect of wage inflation appears even less likely in light of the most recent, disappointing jobs number and the increase in jobless benefit claims reported last Thursday.
• Other drivers of inflation are moderating with oil prices dropping 15% since June.
• Domestic new home starts, traditionally a Fed bellwether, continue to fall despite low interest rates.
• The Chinese economy which served as a major catalyst for the post 2008 worldwide economic recovery (See Vol. 74 www.riskrewardblog.blogspot.com ) has been downgraded and is scheduled to grow at only 7.4% annually, its lowest rate since 1990. Evidencing this is the 40% year-to-date decline in the price of iron ore. China buys 2/3rd’s of all of the iron ore mined in the world, and iron ore drives the economies of many emerging markets like Peru, Brazil and Australia.
Gundlach cites these facts as further reasons for fixed income investors to “take it easy”:
• Quantitative easing in the Eurozone and elsewhere makes US 10 Year rates look attractive---above or below 2.5%. In last Wednesday’s $21bn auction of US10Year Bonds, 53 % were purchased by “indirect purchasers”, a group that includes foreign central banks; the highest percentage since Dec. 2011
• Even if the Fed does raise short term rates, it will only flatten the yield curve. Longer term rates (e.g. 10Year Bonds and longer) will experience little if any disruption due to the unprecedented amount of liquidity worldwide; in other words there is just too much demand for safe haven securities.
I recommend that you listen to a replay of Gundlach's presentation which was closely followed in real time on Twitter. It can be found at www.doubleline.com/webcasts.php .
As noted above, the price of oil continues to “All Fall Down” with the world’s benchmark, Brent oil, below $100/bbl and the domestic benchmark, WTI, near $90/bbl. And demand continues to drop. China is the second largest consumer of oil in the world, and its crude oil imports fell 2.4% in August. Meanwhile, production continues to increase. Thanks to hydraulic fracturing (“fracking”), US domestic crude production is now at 8.5million bbls/day (up from 5million bbls/day in 2007) and is projected to rise to 9.5million bbls/day in 2015 (more than half of US daily consumption and equal to the daily production of Saudi Arabia). Oil stocks, like all securities, are ones that investors “love till you hate.” Well, if falling prices are a sign of hate, then the hatin’ has begun. That said, there are some excellent companies on sale at present. Last week I highlighted Vanguard Natural Resources (VNR). Next week take a look at Breitburn Energy (BBEP) an acquisitive exploration and production company that pays a 9% dividend as one waits for the price of oil (and BBEP stock) to recover. With all of the turmoil in the world today, I am confident both will occur. A safer way to play Breitburn is its preferred stock (BBEPP) which is less volatile but still yields over 8% annually, amortized monthly. If big oil suits your fancy, Jim Cramer and some of my readers are pushing Royal Dutch Shell (RDS).
With so much riding on what happens at next week’s Federal Reserve meeting, I added very little to my holdings this week and remain 2/3rd’s in cash. I like counting the dollars that I have earned so far this year. I don’t want to spend any restless nights living the following One Republic lyric:
“Lately I been, I been losing sleep
Dreaming about the things that we could be
But baby, I been, I been prayin' hard
Said no more counting dollars
We'll be counting stars”
Saturday, September 6, 2014
September 6, 2014 Can You Do It
Risk/Reward Vol. 234
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
“You can go your own way
Go your own way."---lyrics from “Go Your Own Way” sung by Fleetwood Mac
“Come on people. Can you do it, can you do it, can you do it
Can you do it, can you do it, can you do it
Can you do it, can you do it”---lyrics from “Cool Jerk” sung by The Capitols
“My boyfriend’s back/He’s gonna save my reputation
If I were you/I’d take a permanent vacation.”---lyrics from ‘My Boyfriend’s Back” sung by The Angels
On Thursday, as expected the ECB embarked on a new round of quantitative easing (QE) announcing that it will purchase asset backed securities and covered bonds (bonds with an added layer of security). In a bit of a surprise, the ECB also lowered the rates at which it lends to its member banks and raised the penalty for parking money that it holds on deposit for those same institutions. The ECB is doing all of this in order to spur economic activity in the economically moribund Eurozone which is spiraling toward recession and deflation. In so doing, the ECB is "going its own way/its own way" at least in comparison to the U.S. Federal Reserve. With the US economy showing continued improvement, the Fed is winding down its QE program which is scheduled to end in October. Moreover, it has pledged to raise short term interest rates if future data points reveal steady job growth and increased momentum toward its goal for inflation of 2%. The personal consumption expenditure index (PCE), the Fed's preferred inflation measuring stick, is currently at 1.6%.
With the above central bank divergence now a reality, the hypothetical I posited last week (“Can the Fed expect to increase the 10Year Treasury rate by tightening its short term interest rate reins if the European Central Bank loosens its belt and embarks on a new round of quantitative easing?” www.riskrewardblog.blogspot.com ) has become a real question. “ Can you do it, can you do it, can you do it/ Can you do it, can you do it, can you do it/ Can you do it, can you do it” So far, the answer is unclear with the 10 Year yield rising this week but coming to rest well below 2.5% at the close. The disappointing job numbers reported on Friday lessened the likelihood that the Fed will signal any acceleration in its decisional timetable at this month's meeting which is scheduled for Sept. 16-17. Still, I remain cautious; 2/3rds in cash. The stock markets are also digesting the impact of this divergence. Both the S&P 500 and the Dow Jones Industrial Average traded flat for most of the week, but ended with a flair, obviously adopting the adage that bad news (job numbers) is good news at least when it comes to keeping interest rates low and stock prices high.
Those that invest in the oil patch likely have encountered Kevin Kaiser, the energy sector analyst for Hedgeye. Hedgeye describes itself as “a bold, trusted, no-excuses provider of actionable investment research.” In times past, Kaiser has bashed Kinder Morgan and Linn Energy only to be proven wrong. Despite this, Hedgeye has not sent Kaiser on a “permanent vacation.” And now he has attacked Vanguard Resources (VNR) which he states is “worth (only)a small fraction of its current price.” (Small fraction? Really?) Kaiser’s track record notwithstanding, VNR’s stock has plummeted 12% since July 29th. Admittedly, VNR’s dividend is not sustainable at its current coverage ratio, but its outlook is good, and management is on record that its 8.5% yield is not in jeopardy. That said, until VNR’s “boyfriend” or some defender other than management emerges to “save its reputation”, its price likely will continue to languish. I see this as a buying opportunity.
This week, one of my favorite market mavens (see Vol. 173 www.riskrewardblog.blogspot.com), Howard Marks of Oaktree Capital Management, published his latest memo. It can be found at www.oaktreecapital.com and I recommend it to your attention. Therein, he discusses various market risks. One risk he identifies is FOMO, the fear of missing out. FOMO is a silly reason to invest, but a real one nonetheless. Having booked a 7% return so far this year, I wonder if my foray back into the market is driven less by intellect and more by FOMO. I would hate like hell to have my year devolve into a pathetic Fleetwood Mac lyric:
“I climbed a mountain and I turned around
And I saw my reflection in the snow-covered hills
Till the landslide brought me down”
I don’t think FOMO is the reason I am back in the market, but it is something against which I must guard.
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
“You can go your own way
Go your own way."---lyrics from “Go Your Own Way” sung by Fleetwood Mac
“Come on people. Can you do it, can you do it, can you do it
Can you do it, can you do it, can you do it
Can you do it, can you do it”---lyrics from “Cool Jerk” sung by The Capitols
“My boyfriend’s back/He’s gonna save my reputation
If I were you/I’d take a permanent vacation.”---lyrics from ‘My Boyfriend’s Back” sung by The Angels
On Thursday, as expected the ECB embarked on a new round of quantitative easing (QE) announcing that it will purchase asset backed securities and covered bonds (bonds with an added layer of security). In a bit of a surprise, the ECB also lowered the rates at which it lends to its member banks and raised the penalty for parking money that it holds on deposit for those same institutions. The ECB is doing all of this in order to spur economic activity in the economically moribund Eurozone which is spiraling toward recession and deflation. In so doing, the ECB is "going its own way/its own way" at least in comparison to the U.S. Federal Reserve. With the US economy showing continued improvement, the Fed is winding down its QE program which is scheduled to end in October. Moreover, it has pledged to raise short term interest rates if future data points reveal steady job growth and increased momentum toward its goal for inflation of 2%. The personal consumption expenditure index (PCE), the Fed's preferred inflation measuring stick, is currently at 1.6%.
With the above central bank divergence now a reality, the hypothetical I posited last week (“Can the Fed expect to increase the 10Year Treasury rate by tightening its short term interest rate reins if the European Central Bank loosens its belt and embarks on a new round of quantitative easing?” www.riskrewardblog.blogspot.com ) has become a real question. “ Can you do it, can you do it, can you do it/ Can you do it, can you do it, can you do it/ Can you do it, can you do it” So far, the answer is unclear with the 10 Year yield rising this week but coming to rest well below 2.5% at the close. The disappointing job numbers reported on Friday lessened the likelihood that the Fed will signal any acceleration in its decisional timetable at this month's meeting which is scheduled for Sept. 16-17. Still, I remain cautious; 2/3rds in cash. The stock markets are also digesting the impact of this divergence. Both the S&P 500 and the Dow Jones Industrial Average traded flat for most of the week, but ended with a flair, obviously adopting the adage that bad news (job numbers) is good news at least when it comes to keeping interest rates low and stock prices high.
Those that invest in the oil patch likely have encountered Kevin Kaiser, the energy sector analyst for Hedgeye. Hedgeye describes itself as “a bold, trusted, no-excuses provider of actionable investment research.” In times past, Kaiser has bashed Kinder Morgan and Linn Energy only to be proven wrong. Despite this, Hedgeye has not sent Kaiser on a “permanent vacation.” And now he has attacked Vanguard Resources (VNR) which he states is “worth (only)a small fraction of its current price.” (Small fraction? Really?) Kaiser’s track record notwithstanding, VNR’s stock has plummeted 12% since July 29th. Admittedly, VNR’s dividend is not sustainable at its current coverage ratio, but its outlook is good, and management is on record that its 8.5% yield is not in jeopardy. That said, until VNR’s “boyfriend” or some defender other than management emerges to “save its reputation”, its price likely will continue to languish. I see this as a buying opportunity.
This week, one of my favorite market mavens (see Vol. 173 www.riskrewardblog.blogspot.com), Howard Marks of Oaktree Capital Management, published his latest memo. It can be found at www.oaktreecapital.com and I recommend it to your attention. Therein, he discusses various market risks. One risk he identifies is FOMO, the fear of missing out. FOMO is a silly reason to invest, but a real one nonetheless. Having booked a 7% return so far this year, I wonder if my foray back into the market is driven less by intellect and more by FOMO. I would hate like hell to have my year devolve into a pathetic Fleetwood Mac lyric:
“I climbed a mountain and I turned around
And I saw my reflection in the snow-covered hills
Till the landslide brought me down”
I don’t think FOMO is the reason I am back in the market, but it is something against which I must guard.
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