Safe Again
August 31,2014
As of Friday’s close the VTI trade of December 31, 2011 is still open and ahead 69.74%. That amounts to a 28 month average gain of 2.49% per month, an average gain of 29.88% per annnum.
As of today, VTI ….( Vanguard total USA stock market )….is 7.41% above its 200 day simple moving average. VTI is 6.9% ahead since January 1, 2014. Its beginning to lag the ETF….”SPY” by a bit because ( it is explained that the small cap stocks in VTI will create a drag because small cap stocks are very reliant on borrowed capital to grow and the market expects their cost of capital ( interest rates ) to rise. On the other hand SPY , ( the S&P 500 ) contains far fewer stocks needing borrowed money to grow.
Since I’m not in sync with the VTI trade, I use VTI as the coal mine canary indicating its safe to invest in the general market.
Accordingly, on Tuesday, September 2, I will invest 1/12 of my liquid investment assets to purchase more SPY.
Supporting this decision is my assessment that an analysis of fundamental factors leads to a clinching conclusion that the widening gap between USA bond yields and USA equity yields is highly favorable to equities.
The only cloud on the horizon is Mr. V. Putin. I believe that ultimately we will be smart enough to fold our cards, this hand, because we are over reaching….especially in view of the fact that our European allies have not taken the lead on this. The longer this goes on , the weaker the Obama administration is going to look. Remember we gave Hitler the Rhineland, Austria and Chechoslovakia before he went over the line in Poland. I think we should acknowledge that this hand is Putin’s simultaneously putting him on notice that we are keenly interested in how he acts in the Baltic region. Obama has telegraphed that we are not interested in getting involved in ground wars. Do you think Putin considers this a sign of strength or weakness ?. Uncertainty over the Ukraine could keep the stock market in check, despite powerful underlying fundamentals which I am positive will reassert themselves as soon as the Ukraine issue is peaceably settled..
Richard Maurice Gore
PS…This is my 97th post since I started this blog August 2010. I don’t know how helpful its been for you…I hope it has been….but, its been a big help for me in terms of organizing my thoughts before action.
