Wednesday, January 13, 2010

Happy New Year

Sitting on my book shelf amongst other financial reading, placed well below my Philip K. Dick collection, is The Man Who Beats the S&P. Bill Miller, a fund manager for Legg Mason, had an almost two-decade run where his primary fund outperformed the S&P 500. Keep in mind, this included multiple negative year returns. But like the turkey in Taleb's opening Black Swan analogy, Miller did not see the crash coming, and his performance imploded over the course of the financial crisis. People looked to Miller for comfort, for a way to outperform, even as he recommended buying AIG and Lehman brothers all the way to the bottom, costing his clients billions.

In between a hotly contested game of Chutes and Ladders with my daughter, I saw Miller barking up regional financials and stocks in general, noting that risk has passed us by because of the crisis. It was as if losing 60% of all you clients money in a single year was simply a blip in time, an "oh-well, sucks to be you" type of commentary. Momentum into the new year has carried modest stock gains but a new spike in gold and oil. Where the conviction for buying stocks comes from I have no idea.

Eric Janszen of Itulip recently pointed to 4 possible stock/gold scenarios, with 3 of them reducing the S&P ratio/gold price even more dramatically. The mainstream media has remained bullish however, and the old guard is happily sneering after market success last year. A recent consult with BBB reader HK has reaffirmed my own hazy outlook aside from gold this year, and a need to stay cautious and in cash for the time being.

Aside from the market, the impending playoff games are coming in with big lines after a weekend of blowouts except for the instant classic Pack/Cards game. If this game didn't secure Warner's HOF credentials, I don't know what will. I'm torn by my always winning strategy of betting against Manning in the playoffs/always bet Colts against Ravens worlds colliding matchup. I like the Cards much better as TD dogs, and while I foresee the Chargers winning at home, 8 points is a lot. The Boys' as underdogs seems solid, and I think a Cards/Cowboys teaser may be in order.

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