Wednesday, January 2, 2013

On Monday December 31, 2012 I bought some call options on the S&P 500 (SPY) because in the midst of all the noise about the fiscal cliff I believed that Congress only cared about how bad they would look if they did nothing. I am pretty sure Congress doesn't think in terms of what is good for the country they only think about what is good for Congress. I thought that if they did something (anything) the stock market would react on the upside only because Congress wasn't totally dysfunctional. This morning I sold the options for a profit. I did it as soon as the market opened because I think once the markets realized how little the House and Senate managed to do the rally would fizzle pretty quickly. This is a pretty silly way to make investment decisions.

2013 will be a difficult year for the markets. I expect:

The political situation remains confused and contentious and rancorous and ineffective.

Bond yields will remain low but there will not be the price appreciation witnessed over the last few years.

Stocks should be everyone's first choice and if the politicians don't manage to kill the economy, equities could be in line for a solid year.

With low interest rates I expect the housing sector will continue to improve.

Private sector credit quality will continue to improve and municipal sector credit quality will continue to slide.

I think John Boehner is done as Speaker of the House

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