Bloomberg TVDavid Zervos is the Jefferies strategist who’s been famously bullish (and right!) on stock for the past few years.
He changed his tune sharply after Cyprus, saying that the deposit haircut was a horrible move, and that he was going into his “bunker.”
Well, Cyprus didn’t have any big impact on anything, and now Zervos is jumping ‘back in the risk pool’ going back to his long-term investing thesis, that thanks to the positive actions of top central bankers, markets will continue to rally.
…the Cypriot bombs have been diffused and Kuroda delivered. And to be sure, the NKY and USDJPY have continued to run. But since in middle of March, the NKY is only up an additional 7 per cent, and the USDJPY only up an additional 3.5 per cent. In the grand scheme of a 45 to 50 per cent move, this is nothing to get too excited about. The BIG moves in Japan came well before the April 4th meeting. Since then it has just been window dressing. Furthermore, the spoo has done very little since mid March, and now sits very close to its pre-Cyprus levels. My take away after being on the risk sidelines for the last 3 weeks is two-fold:
1. I didn’t miss much
2. Much of the recent BoJ action was already priced into the market.
But of course our decision to temporarily take chips of the table was a tactical trading decision. Remember I spent many years sitting in front of the screens running a levered macro portfolio. My day was dominated by 3 decisions – should I cut, add or sit. All day…..cut, add, sit, cut, add, sit…..! So you will have to forgive me if I occasionally act like a trader and not like an investor – old habits die hard. And while I was never much for model based trading rules, or systematic trading, there were always a few simple principles I followed. One of them was – “take some profits when you are up 40 per cent in 4 months”! So while Cyprus provided a convenient rationale to step away, we have to eventually jump back into our long term “investment” strategy. And yes, there is a big difference in long term strategic investing and short term tactical trading. In the end, we must always keep our eye on the big picture – REFLATION. To that end I am reprinting below one of my favourite big picture commentaries from Feb 26, 2013 entitled “The important stuff and the fluff”. Please take the time to read it again, as it is as relevant today as it was back then. And going forward, don’t be surprised by the occasional tactical trading recommendation – its only natural from a “recovering” trading addict. As for now however, the only part of cut, add, sit I will be focusing on is the “add” part. Here’s to hoping for a nice sloppy dip to buy!! Good luck trading!
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