Santa is that you?

Posted: December 21, 2011 in Uncategorized

Today was a wild ride up for the equity markets, just when we thought that Santa was going to leave us coal in our stockings we have a 3% rally to the upside. It was a rip roaring ride that made me think Santa had NOS boosters in his sleigh, not even President Obama could him down. For those traders who were long equities going into the day congrats, investors however have been missing these moves all year it seems. Most if not everything I do as a Financial Advisor is manage expectations and mitigate risk. As nice as a 3% rally is, I can’t for the life of me think this is a healthy market. Day’s like today make investors feel like they are missing out on the egg nog. According to CNBC:

Worldwide, investors have yanked $34 billion out of equity funds this year and put $75 billion into bonds.

In the U.S., stock funds, including both exchange-traded funds and mutual funds, squeaked out a miniscule $4 billion net inflow this year, while fixed income-focused managers collected a monster $86 billion, according to EPFR.

I supposed being crushed by 2 major market corrections in the last 10 years and a cyclical bear market will kill whatever investor confidence is left.

This gets back to managing client expectations, my clients understand that we are not trading this market, the dizzying volatility will drive even the most seasoned investors batty. Between Greece, the Jack Asses in Washington (on both side of the aisle), and talk of a double dip recession  everyone is running for the hills. Days like today are the exception not the rule. We know that most of the clients we deal with on a daily basis are not suited to handle the daily swings in this market. And while they look nice and keep the phones quiet, we know that it is not healthy. No advisor worth his salt is telling their clients to jump into the fray right now, to many factors heading into 2012 could cause a neck breaking move to the down side. By managing expectations we manage risk in this New Normal (Thanks Bill Gross). Currently the risk is not to the upside or to the downside, the risk is letting your clients feel like they are missing out on something. Santa will come and go as he does every year, I would recommend leaving him the traditional cookies and milk but don’t expect a bag full of goodies. This year he may just disappoint you.

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