Lots of noise

I know the market feels like it’s gone up – a couple of up days, even on low volume, make everyone feel giddy inside. But let’s review where we are:

The S&P 500 has done a lot of moving without getting anywhere. It’s about where it was at the beginning of the year, which is roughly where it was in mid 2008 (and by the way, about where it was in 1998 for those keeping longer term track).

Meanwhile, the 10 year yield is roughly where it was in mid-2009:

On the other side of the Pacific, we’ve been looking at the yen for a long time. And yes, I told my readers that I went short in late 2009. Guess what…I’m still short and the yen is pretty much right were I got into my position. Not that I’m proud of a slightly down position, but the reasons to get into the trade haven’t changed and none of the factors that would get me out have been seen. Can it get stronger from here? Of course and I wouldn’t even be surprised.

But all of this talk of yen being a store of value misses the point of the fundamental challenges Japan is facing with no easy way out. Multiple people have recently recommended books like When Money Dies: the Nightmare of The Weimar Hyper-Inflation by Adam Fergusson and Dying of Money: Lessons of the Great German and American Inflations (see for example this recent article HT MacroMan). I’m not opposed to the possibility, but surely Japan is in much greater danger of the hyperinflation mentioned than the US.

But I digress, because the point of this posting was to mention that we have had a lot of noise. I can show other charts, from EEM to different currencies, but the themes are the same. I continue to look to fundamentals as the critical guides for valuation and long term opportunities, and at least in equities, valuations are expensive – so we wait.

Last 5 posts by Yaron Sadan

• That sinking feeling - May 18th, 2012
• Opportunity on the horizon - May 18th, 2012
• Early can hurt - May 16th, 2012
• Diversify your Diversification - May 15th, 2012
• Losing Money Isn't a Crime - May 15th, 2012

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