6/12/17 Mr Bojangles/ Reentry

Reopening positions in both the broad market + emerging
markets.  Over-weighting the energy sector (XLE) (which has
entirely retraced its gains since the November election and then some),
Brazil [EWZ] (which appears to have found support at current levels
following the May 18 Crash), Russia [RSX] (which likewise has retraced
its post-election gains and has consolidated nicely over the past three
months), and China [FXI] (I consider this morning's -1% decline a buying
opp).

I'll have more to say about the markets this afternoon or
tomorrow.  I think it's time to (re)embrace the global stock market, which
continues to move higher on strong fundamentals, and will probably do so with
or without the infrastructure spending + tax reforms promised by the Trump
Administration.  We'll look back in a few years and thank Donald Trump for
having created a beautiful wall of worry.

Addendum:

(a) Emerging markets.  Despite the +18% year-to-date, I think it remains a buy.  I would argue further that recent strength signals the beginning of a multi-year bull.  Emerging markets are coming out of a brutal  bear market that bottomed in January 2016.  Zoom out to a ten-year chart of EEM-> we’re likely to see 50 within the next twelve months, followed by a retest of its 2007 high of 55.  Is this a good time to buy?  Here’s the thing.  If EEM is on its way to 50, it’s a great time to buy.  Buying assets surging to new highs on high volume isn’t generally my style, but in this case it’s simply a matter of reentering positions opened at bear market lows in late January of 2016 (and closed in March of 2017).  The buying interest in emerging markets is real.  What matters to me is where it’s headed, which is probably another leg higher (let’s say +30% within a year) and ultimately a doubling from today’s prices.


(b)  Energy.  ‘Infrastructure’ will happen, regardless of what happens in the White House.  After a punishing first half, I think a +50% gain into December is likely.

(c)  Bottom line.  We continue to read stories that warn of asset bubbles and investor euphoria, along with comparisons to 1987.  I disagree.  My sense of investor sentiment is one of widespread disbelief.  

(d) Footnote.  I was sitting in a darkened cafe at the Landmark in Hong Kong the weekend of  June 3 when Nina Simone's version of Mr. Bojangles drifted over the loudspeakers.  Her understated interpretation gave me a new appreciation for the song.  Our thought processes make connections in synergistic fashion, and over the next few minutes I 'rearranged' my perspective on the markets.  If we overlay a 'snapshot' of the total world market over that of the US market, it becomes apparent that a bear market (one that started the summer of 2015 and bottomed in early 2016) has already come and gone (albeit against the backdrop of a more muted decline in the US).  Which puts us today in the early stages of secular global bull.