Many market participants are sitting on cash to wait for opportunity to replenish the portfolio but only to see that market gets strong support despite widespread market pessimism which indicates that buyers are expecting to buy at a much lower market value. On the other hand, holders of equity stock are already rich in cash and are reluctant to exchange stock for cash despite possibility of further depreciation.
Dividend stocks, especially blue chips, are the most popular among investors because corporate earnings are growing steadily. As a result, corporate bonds are also in high demand from investors who are seeking safety as well as reasonable return. As mentioned in previous post, there is observation that retail investors are slowly coming back to the equity stock market. Remember that last October individual investors started buying stocks and drove the market until this year's peak in May when market manipulators began to sell down the market. The trading volume started to decrease as capital flew out of equity stock market. Currently trading volume is almost lowest of the year amid holiday season.
Despite increasing interest from retail investors in equity stock market, they are very cautious in buying and only looking for short term profit. Investors are mostly thin on stock holding and anxious on the mere return of cash or equivalent. Although the macro economy is not likely under the threat of a "Double Dip", stock market can still go into a severe dip due to market manipulation. This is the worry of many market participants as well as sideline cash.
As the overall economy recovers from the damage of financial crisis, asset market including equity stocks and real estate will eventually appreciate in value to reflect the growth in overall wealth from economic activities.
The uncertainty of short term market direction is whether to go into collapse first so that market participants can buy at fire sale discount as in the midst of financial crisis, or to climb a wall of worry when investors are sitting on the sideline with cash until the macro economy confirms a full recovery and subsequent growth.
Making a List, and Taking It to the Pawnshop
Christmas this year has come to the neighborhood pawnshop — and business is booming like never before.
Sue Gallagher, 54, is one shopper who now works through her Christmas list at a pawnshop before heading to Wal-Mart or Target.
The gloomy economy is the most immediate explanation, but industry experts also point to the success of television shows like “Pawn Stars,” which have attracted a more mainstream audience to the stores.
Lacker sees no need for Fed to ease
The Federal Reserve is unlikely to need to ease monetary policy further given the country's steady if moderate pace of economic growth, Richmond Fed President Jeffrey Lacker said on Monday.
Lacker, an inflation hawk who will rotate into a voting seat in the policy-setting Federal Open Market Committee next year, said he expects the economy to expand between 2 percent and 2.5 percent next year.
Some Fed officials believe another round of monetary stimulus could help bring down the nation's 8.6 percent jobless rate further. But Lacker stuck to the view that the bulk of problems holding back the job market are beyond the reach of monetary policy.
Analysis: Money managers forge ahead despite volatility
It is a good time to be a U.S. stock investor for the long term - if you can ignore the noise erupting every few hours.
That is the advice from some money managers, who are taking the opposite tack of many who want to avoid the turbulence. Instead, they are confronting the volatility head on, adding to stock allocations rather than standing pat.
Much of their increased optimism stems from a belief the U.S. economy is likely to avoid another recession, even as a European downturn seems more likely.
But there remain many reasons to be wary. Even optimistic money managers acknowledge that Europe's debt troubles are far from over and the fallout could still extend to the United States, especially the U.S. financial system.
Cautious retail investors overall still prefer bonds and cash to stocks. Assets under management at all equity funds dropped by $186 billion for the year through December 12, according to Thomson Reuters' Lipper. For the same period, assets under management at all taxable bond funds rose by $69.8 billion.
The well-worn arguments about attractive valuation have not won the day in 2011. The benchmark Standard & Poor's 500 appears headed for another losing year, despite valuations that have not been this low in a decade.
The price-to-earnings ratio of the S&P 500, a measure of the price paid for a share relative to the company's profit, is low by historic standards. The S&P 500's forward P/E ratio of 11.3 is at its lowest in more than a decade, S&P data shows.
One approach to investing in stocks today is to aim for global diversification, according to Todd Petzel, chief investment officer at Offit Capital Advisors.
Is the Falling VIX a Bullish Indicator? Yes Says Jon Najarian
Despite tumbling as much as 5% earlier today, the CBOE Volatility Index could be the most bullish indicator on the Street. Sometimes referred to as "the fear indicator," the VIX has been in a downward trend through most of December, dropping nearly 10% in the last two last two sessions, and currently inching below it's 200-day moving average of roughly 25.75.
Big market swings such as we've seen in December are "supposed" to lead to a higher VIX. The curious combination of big moves and shrinking VIX levels has some questioning whether or not it has any predictive value at all.
"In the VIX there's a lot of money that's saying the markets will not be moving as much as they were in September, October, and November," he explains. "It doesn't necessarily mean we have to rally, it just means the moves will be less exaggerated."
For Wall St.'s Big Players, the Holiday Party Is Still Over
Three years after the financial crisis, the Grinch still hovers over Wall Street.
But, mindful of mass layoffs, flagging profits and sustained anger on Main Street, the nation's largest banks have canceled firm-sponsored celebrations or moved them in-house to avoid the costs and the criticism.
For the fourth year in a row, Goldman Sachs and Morgan Stanley have shelved their official holiday parties. The investment banking divisions of JPMorgan Chase, Citigroup and Bank of America have also decided against them. But groups of employees at all five firms were permitted to hold - and pay for - their own festivities.
With large American firms cutting back on holiday parties, private equity firms, hedge funds and others that operate farther from the public eye are taking their place.
At banks without official parties, some employees are making do with less.
Other firms have emphasized charitable giving programs intended to draw attention to their good works.
Those kinds of events can provide the morale boost of a holiday party without the reputational risks, experts say.
"At this point, the crazy, expensive caviar nights don't make sense, but maybe something more subdued would be more appropriate," said Alison Brod, who runs a New York-based public relations firm. "It's pretty sad to do nothing."
History Hints at a 2012 Rally in Financials: Bespoke’s Hickey
If past is prologue, and it generally is in markets as in life, the Financial sector could be poised for a decent rally in the next 12 months. At least that's the assertion of Paul Hickey, the co-founder of Bespoke Investment Group.
Hickey's theory doesn't rely on a sweeping solution to the European debt crisis or other fundamental imponderables. He's focusing on the similarities between the trading in bank stocks today and the price moves in Technology stocks after the tech bubble implosion a decade ago.
For good measure, Hickey reminds us that banks are working off overcapacity (witness the number of lay-offs), a lack of demand for their services, and an almost universal skepticism regarding the industry's ability to recover. All concerns surrounding financial stocks today
The conclusion of the story in terms of parallels between the Tech sector of yesteryear and the Financial sector of today is this: The market did in fact end up rallying without the techs for two-years prior to a nice +10% rally mid-decade. In terms of time frame and sentiment, Hickey says the financial sector is almost exactly where the techs were prior to that rally.
It may not be an unqualified "bottom" call, but Hickey is looking for that same 10% out of the financials next year. It may not seem like much but it's certainly better than the grinding losses of 2011.
Banks Not Lending? Corporate Borrowing Soars in 2011
Consumers may be cutting debt and banks may be tightening up their balance sheets, but borrowing by U.S. corporations is in full swing.
Corporations use syndicated loans for longer-term financing. The loans usually are provided by a group of deep-pocketed lenders who can distribute liability among them and thus decrease their risk. Big Wall Street investment banks are usually the source of such loans.
So far in 2011, syndicated loan volume has increased a whopping 56 percent compared to 2010, according to Dealogic. The total of $1.76 trillion is the highest single-year sum since the pre-financial crisis days of 2007.
Globally, syndicated loan volume grew 27 percent to $3.74 trillion - again, the highest since 2007, Dealogic said.
The spike in corporate borrowing, though, contrasts with the debt-averse private sector.
Consumer credit grew at a 3.7 percent pace in October but is up just about 2 percent for the year, with total consumer debt outstanding at $2.46 trillion, according to the latest seasonally adjusted Federal Reserve data.
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