Ritholtz: Markets Don’t Care about Deficits

Barry Ritholtz of FusionIQ and The Big Picture blog says that markets don’t “really care at all about deficits”, something that is a “great misunderstanding”. Ritholtz tells Bloomberg that while they have long-term negatives, deficits provide fuel that drives economic activity and stock prices. He also says institutional investors are remaining on the sidelines despite the market’s recent turnaround.

The Five Disciplines that Will Make You a Better Investor

What makes a good investor? Barry Ritholtz of FusionIQ and The Big Picture blog says it’s not an MBA or a degree in economics.

“We churn out MBAs like made-in-China widgets, yet few ever become outstanding investors,” Ritholtz recently wrote in a Washington Post op-ed. “And don’t even ask about economists — the profession that missed the housing boom and bust, the Great Recession, the credit crisis and the market collapse.”

Instead, Ritholtz says, excellent investors are “savvy generalists. I can think of five fields that are hugely helpful to asset management. If you were to study these disciplines, your understanding of how markets work would greatly improve. And you would be a better investor.” The five fields:

  • Historian — An understanding of stock market and economic history can give you the perspective needed to make savvy buy and sell decisions, Ritholtz says.

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Ritholtz Talks Economy, Market

Barry Ritholtz of FusionIQ and The Big Picture blog remains bullish on stocks for the short-term, and says the economy is behaving just as one would expect following a credit crisis — that is, with slow growth and soft job creation. Ritholtz tells Bloomberg that it doesn’t matter whether the government raises taxes, lowers taxes, or attacks the deficit — economic forces dictate that this is the type of recovery we’ll see. Ritholtz says he’s 86% long right now. He also discusses why the Dow Transports are a big bullish sign for the economy, how the economy’s strength and the stock market’s attractiveness are very different things, and how he tries to avoid “confirmation bias” in his decisions.

Ritholtz Sees Correction Coming, but Broader Bull Run Continuing

Barry Ritholtz of FusionIQ and The Big Picture blog says he expects a correction of at least 5% to 8% to hit the stock market sometime soon, but doesn’t think it means an end to the cyclical bull market. “You’re just going to get a correction within that” bull market, Ritholtz tells Yahoo! TechTicker. In more detailed commentary on his blog, Ritholtz says he expects large-cap stocks to outperform after the correction ends.

 

Ritholtz Sees Rally Continuing, Risk Factors Building

Barry Ritholtz of FusionIQ and The Big Picture blog says he expects the market rally to continue into the first quarter of 2011, though he sees risks accumulating over the course of the year.

“I see no reason why the rally should not continue into the first quarter of 2011,” Ritholtz writes on his blog. “Markets are over bought, but can remain that way — persistently overbought — for quite some time.” He says that the individual investor has been “MIA” during the market’s turnaround over the past 22 months, but may “get taunted in if the markets keep rising.”

On the positive side, Ritholtz says corporate profits are strong, the economy is “grudgingly” improving, and the Presidential cycle bodes well for the market.

But on the negative side, he says that sentiment is “frothy”, and that broad consensus that the market will gain — which is in place now — “always makes me nervous.”

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Ritholtz Likes Telecoms, Wary of Gold

Barry Ritholtz of FusionIQ and The Big Picture blog has been moving back into stocks, and says a “Don’t Fight The Fed” viewpoint is a big factor in his moves.

“When the Fed comes out and says, ‘Gee, the economy is worse than we expected,’ that things are taking much longer to get back to normal, therefore we want to do another round of quantitative easing, it’s tough for an investor to stand in the way of that,” Ritholtz tells Barron’s. You can’t step in front of a locomotive with your hand out and say ‘halt.'”

Ritholtz says he’s high on telecom stocks or stocks related to the industry, citing attractive valuations and strong dividend yields. He also talks about the one bank stock he owns, and why he’s soured on gold.

Ritholtz Ups Stock Exposure

Barry Ritholtz of FusionIQ and The Big Picture blog has been moving more cash back into stocks.

According to The Wall Street Journal, Ritholtz “waded back into the stock market last week, reducing his firm’s cash position from 80% to just over 50%.”

“[That] does not exactly make us rampaging bulls,” Ritholtz said. But “we felt we could withstand a little more risk,” given the negative sentiment and the prospect of gridlock in Washington after the midterm elections, which, the Journal says, is usually good for Wall Street.