Thoughts

Today has been encouraging for the bulls, who appear undaunted after a winning skein that began at August's end.

Of course, the normal fireworks of the triple witch could impact the streak and so could some healthy profit taking later in the week.

Run, don't walk, to read two excellent op-ed pieces:

1. Orin Kramer's "How to Cheat a Retirement Fund"; and

2. Arthur Brooks and Paul Ryan's "The Size of Government and the Choice This Fall."

I am hearing Hillary Clinton and Joe Biden could swap their respective Secretary of State and Vice Presidential positions.

Behind the scenes, there is already active discussion that Hillary Clinton and Joe Biden could replace each other in their respective Secretary of State and Vice Presidential positions.

Given the length of time until the 2012 Presidential elections, we will not hear much about this until early next year!

But conversations have commenced.

The phase-in period of the Basel Accords' new capital rules is all the way out until 2019.

To quote Denny Gartman:

In other words, the banking authorities punted the capital ball down the field to others to handle years into the future. In other words, this is almost comically silly.

Stocks are cheap relative to bonds, but that does not mean that equities are inexpensive in an absolute sense.

Bonds are overpriced.

There will be no double-dip. Nevertheless, the domestic economy will experience a (consensus) shallow and inconsistent recovery contained over the short term by political (regulatory and tax) uncertainties and over the intermediate term by numerous non-traditional headwinds.

After a strong cyclical surge in 2010, corporate profits should expand further (albeit modestly) in 2011.

The risks to forward corporate profit and U.S. and worldwide economic growth rates as well the overall stock market's progress are all to the downside but not meaningfully so.

If I am correct in these views, the above conditions will likely result in a relatively trendless but volatile U.S. stock market into early 2011, presenting a clear challenge to:

1. a buy-and-hold strategy; and
2. delivering excess returns.

This near-term backdrop will not be a permanent condition, but, for the time being, it will likely provide fertile opportunities for a shorter-term, catalyst-driven trading strategy.