This QE Bower My Prison

The Federal Reserve’s persistently aggressive monetary policy has had a paralyzing effect for many investors over the last several years. Like a skillet of boiling hot milk being emptied on one’s foot, repeated monetary stimulus programs, including three rounds of quantitative easing, two rounds of Operation Twist and the quintupling of the Fed’s balance sheet, has distorted capital markets in such a way that it has imprisoned many investors to a bower of heightened risk control and uncharacteristically short-term thinking amid the expectation that the negative spillover effects from such unprecedented policies will eventually come home to roost in a significant way. But as we enter the twilight of the Fed’s supposed final round of quantitative easing, the confined investor has reason for gladness, for they can continue to delight in the splendor of today’s market while also knowing that nature never deserts the wise and pure in the end.

Please click on the link to read more of my article on Seeking Alpha.

A Surprising New Portfolio Diversifier

Portfolio diversification is a primary objective for most investors in any market environment. And it is a particular priority today for many that wish to participate in any further upside the aging bull market may provide in the coming months while also seeking to protect against downside risk. Normally for stock investors, true portfolio diversification is achieved through allocating to other vastly different and generally uncorrelated asset classes such as long-term Treasuries and gold. But in 2014, a surprising new category has emerged from within the stock market itself to become an effective portfolio diversifier in the current environment. This category is the utilities sector, and it may now be worth another look following a recent pullback.

Please click on the link to read more of my article on Seeking Alpha.

Why Thursday’s Sell-Off Matters

The stock market was rocked on Thursday, posting its worst single day decline in nearly four months. Such declines are certainly not unexpected, and it was clear following a spring and summer of quiet markets that some degree of downside volatility was more than overdue. But unlike many other recent stock market pullbacks, Thursday’s decline was notable, as it came with a convergence of troubling forces not seen in capital markets in over a year. In short, the stock market sell-off on Thursday matters, and how events unfold in the coming days should be watched closely for potential action, if needed.

Please click on the link to read more of my article on Seeking Alpha.

Less Than Zero: The Case For Cash

Investors receive virtually no direct reward for holding cash in the current market environment. Thanks to the Fed’s zero interest rate policy that has been in place since December 2008, the interest earned for holding cash has fallen to effectively nothing even on the largest of balances. And with the stock market soaring to record highs in recent years during a time when annualized inflation has been running anywhere between +1% to +4%, the opportunity cost associated with holding cash has been dear to say the least. But despite all of these challenges, the case for holding cash may be growing stronger with each and every point that is added to the S&P 500 Index.

Please click on the link to read more of my article on Seeking Alpha.

The Way Of The Bull And The Bear

I have been struck in recent weeks by the seemingly inverse relationship between capital markets and the mood of those investors that are participating in them. For while markets including stocks have entered into a period of almost eerie placidity, the tension among investors across the philosophical spectrum appears to be rising. But whether you are following the way of the bull, the bear, or somewhere in between, it is important to remember that we are all on the same path in the end. We all wish to grow the value of our capital over time while protecting against the risk of loss. And while not all of us can dictate the direction of the market on any given day, week, month or year, we can embrace the fact that certain principles will always be true about the markets in which we participate. If one can maintain the openness to listen with patience, maintain a rich texture in our thought processes and avoid becoming overly reactive with our conclusions, we provide ourselves with the best opportunity for success and happiness in the end.

Please click on the link to read more of my article on Seeking Alpha.

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