After the biggest surge in the stock markets since 2009 this late November 2012, I’m left wondering whether we’re back to bull markets or whether now is a ripe time to sell. Although it shouldn’t matter, the answer depends on how well your portfolio has done. If you’ve been 100% invested in equities since the beginning of the year, you are likely only up 11%. If you’ve got a 50/50 mix of equities and bonds, you’re likely up in the mid single digits.
It’s always a good time to reassess one’s portfolio once a quarter, especially towards the end of the year. One should take a view on the markets in 2013 and rebalance accordingly. If you’ve been following my site for a while, you know that I have a very optimistic outlook on many things. Perhaps it’s because things are so robust in San Francisco thanks to so many great companies like Apple, Facebook, Google, YouTube, Twitter, and eBay all thriving. Then again, I’ve always been very upbeat.
Below are some positives and negatives I can think about that will help in the thinking process.
The positives: November Chicago PMI at 60+ indicates an expansion. Record high Black Friday and Cyber Monday retail sales demonstrate consumers are cashed up and positive about their jobs. Low interest rates increase cashflow for property owners and anybody with revolving debt. Pending home sales in November are up 10% MoM vs. +2% MoM expectations. Private sector hiring continues to trend up with unemployment levels falling to a 2.5 year low of 8.6% as of November, 2011. WTI oil is back over $100, signifying higher demand. Corporations have the largest amount of cash on their balance sheets on record, signifying a potential unleashing of buybacks, increased dividend payouts, and M&A. Markets have historically rallied during an election year on false promises. Valuations are reasonable and the S&P500 dividend yield is more than the 10-year risk free yield of 2%.
The negatives: EuroZone debt crisis, US state budget woes, political gridlock, and unemployment rate still above 8%.
Positive anecdotes: Raised rent by 10% in one of my rentals this fall. Vacation rental pre-bookings to Lake Tahoe have been the strongest I’ve seen in years. Buses are so jam packed they skip stops, necessitating I walk three stops away to get on. I have to call at least a week in advance to get reservations at a restaurant that averages $75 a person. Zynga is looking to go public with a US$10 billion valuation in December. Facebook is looking to raise $10 billion with a $100 billion dollar valuation in 2012. Google had blowout 3Q results, even at its large size. Online advertising income has been consistently on a stable to upward trajectory all year. A friend went from an average $3,500/month two bedroom rental and bought a $3 million house out of the blue due to a liquidity event. A couple friends are finding jobs and leads again when they couldn’t this summer.
Negative anecdotes: Compensation firms think bonuses will be down 20-40% in the financial industry on average. Mass layoffs at companies such as American Express and the US Postal service seem inevitable. The vacation property market is still quite weak.
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