It’s been a tough winter, and not just because of the weather. The markets have given us opportunity but it’s been a barbed-wire wrapped one: Big moves down have looked impossible to buy and have sent me running for conservative, dividend paying stocks.
But this latest swing bringing the Dow again above 16,000 looks equally dangerous. Once again it strikes me that the only reasons to buy stocks are as an arbitrage against surprisingly strong bonds – as long as that 10 year yield hovers near 2.5%, you’ve got no choice but to invest in stocks.
I’ve been trying to relate this bond-arbitrage idea to the oil and gas stocks I cover too; there are prices at which I want to own both the beta plays on domestic production of shale oil and the higher paying (and safe) dividend stocks more often represented by mega-cap integrated oil companies. 2014 is not going to be like 2013 – I imagine a yo-yo, range-bound market that will force us to buy value when it comes and not be afraid to sell it when it rallies. Unless there is a change in Fed policy (and with Janet Yellen at the helm this is more than unlikely), I cannot buy any stocks blindly depended upon any production thesis, no matter how strong. Momentum is out for 2014 – I want value.
Luckily, there is still some value to be had in the market today, even with the Dow at relatively lofty levels – but they’re…