Monday, January 16, 2012
Waves and sand and insurance salesman
On my cell phone,I have have an ignore button that you slide across the screen when you don't want to answer a call.I would have never guessed how satisfying that simple act could be when I was buying the phone. At first, I did the ignore slide only for family members who don't know how to have a short conversation ,or worse, needed to borrow money, but very soon it expanded to all numbers that I didn't recognize.After my wife noticed the habit she asked me why I did it and, I thought about it, and said "because there are insurance salesman out there". If anyone reading this is fortunate enough to not be familiar with the strategy of the insurance salesman or "financial advisor" as they prefer, they are tenacious and amazingly persistent. If you say yes to coffee, and they assure you it's "just a quick cup of coffee" you have exposed yourself to a force that is as relentless as waves pounding rocks into sand and as unshakable as herpes. Over the years of their existence the insurance salesman has realised that if you stick with it and call and ask and beg and plead, that over time the chances that the mark will acquiesce and buy something greatly increase. Frankly, I'm surprised that this works because my inclination leans more towards violent outbursts but you cant argue with results. The fed is employing a similar strategy. The fed strategy has been to eliminate any reasonable low risk interest rates by collapsing rates along the entire treasury curve making it tantamount to stuffing cash in a mattress. Corporate and municiple rates have followed suit because they will only pay what they have to ,compared to the "safety" of treasuries..So the game is simple ,the fed throws money into he system and then directs it towards risky assets by making less risky assets unattractive. Up until this point it has been successful only by a broad definition of "successful" and money has not gone out to the far reaches of the risk spectrum and invested in real estate or banks. But the fed knows what the " financial advisor " knows and if you wear them down ,over time ,they will get frustrated and they will jump. As 2012 has begun we have seen a change that I think will continue and that home builders and real estate should finally begin to do well..I also believe that "dinosaur tech" should do well and I am long msft and Cisco in response. The headwind, as always , is Europe and that problem does not appear to be going away so I will stay with my short position in the euro and also increase my longs in equity options volatility.. Tomorrow will be an interesting day for the euro as it had an outside day down on Friday and at the low of a move that is a bad sign. But,as many have pointed out, the euro trade is very crowded and could have a sharp correction to shake out the weak hands but that will just be an opportunity to sell it...
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IF you take on the insurance salesman and pitch him with your goods, you may end up with a client, plus it isa good way to see if you are selling yourself well! I use that technique all of the time with the numbers I do not recognize and over the years I have been able to actually sell a home to someone who was pitching a subscription to some rag (and she never even told me which one it was, as I turned the conversation to my interest.) Since they called me, I took the initiative. As to the market, I am in pretty much the same as you, but using options that expire far enough out that any squeeze attempt will not make me move. Things look blacker across the pond than are being reported, in my opinion, and I think that any rally will be quickly shorted, rather than the dips being picked up.......Take care Jim. John Case
ReplyDeleteUnfortunately, 1) When treasury rates shoot back up in a year or so, many people will get totally hosed (like buying a house in 2007, they'll be so far underwater all they can do is Hold), and 2) In a couple years, we will be the ones who can't afford our debts as money flows out of Treasuries and our borrowing costs approach 7%. What a proud time that will be.
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