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Reality TV



I would like to elaborate a bit on a message I sent Toddo earlier. The investment public has lost faith in the integrity of the financial markets due to three years worth of losses after a bubble burst. Right or wrong, that perception takes a long time to change - more than just four months. It takes time for proof of change to come before the average investor believes it and begins putting what they have left of their investment dollars back into the market.

This is a huge point. Without new money continually coming in there is just a rotation of the same money that is already in. When you think about that it is easier to see how the market goes sideways as a whole, while individual sectors spike higher and get smacked only to reverse a few sessions or weeks later.

The President's proposal (IT IS ONLY A PROPOSAL) had everyone on Wall Street and in the media talking about how positive the dividend cut WILL be for investors. I have been noticeably absent from discussing it because nothing is even close to getting passed and debate has just begun. People were taking a proposal that may or may not actually get passed, yet were buying stocks like it was passed.

The reality is that while dividends are great to get and may eventually even be tax free at the corporate and/or individual level, when you are buying stocks based on income expectations, you better remember the daily, weekly, monthly, yearly volatility involved when buying stocks.

It is great to get that $0.80/ share annual dividend on Bell South (BLS), but you better be able to handle the $1.48/share drop today. The point Toddo and I were speaking about was the number of investors that moved back into the market on a concept that was far from reality and are now likely under water...or at the very least concerned. That doesn't help the long-term sentiment regarding the integrity of the process, which likely delays the new bull market that everyone (especially me) is hoping for. It also makes for a whole new group of potential uncomfy sellers on a rally.

No matter how I slice it, I can't get too negative or too positive right now because both STILL have compelling arguments. My opinion doesn't make for great headlines on the TV shows I appear on - but it does make for good reality TV.

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No positions in stocks mentioned and isn't Daisy hot when she gets mad?!
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