Cutting Through the Hogwash

 | Jan 07, 2013 | 7:47 AM EST  | Comments
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Every year we see some themes that seem to transcend everything out there. These themes are like rising tides: They seem to take up all boats in the water, even ones that aren't nearly as sturdy as boats stuck in still waters or tides that are ebbing.

Last year was a bountiful year, with the S&P 500 up 16%, including reinvested dividends. Yet it would have almost seemed like a down year if you'd listened to the chatter, or read the papers, or did anything that amounted to a superficial following of the market.

In short, it seemed market commentators, pundits and hedge-fund managers decided to leave their senses and focus only on Washington. This became the controlling issue in the discourse. It seemed like the main event. But in reality -- meaning actual stock performance -- it was a sideshow. The prevailing themes, the ones that stand out, are quite obvious from looking at the charts, and they've totally trumped any stress from the Capitol.

That brings me to a thought regarding the next Washington crisis. We are totally right to stay focused on these various crises -- but only because, in a tactical sense, they create buying opportunities. As I look through the charts for 2012, I am amazed at how many opportunities appeared not from the companies themselves, but from Washington's shenanigans and election worries. In fact, I think 2012 will turn out to be the year when we began to see a pattern: You buy on Washington-inspired dips and you trim when it looks like Washington has its act together, which we know it doesn't.

It's pretty simple: What's good for business is anything but Washington, with the exception of the much-scorned Fed chief Ben Bernanke, who is still providing rocket fuel for some of these trends. What's bad for stocks is anyone inside the Beltway -- Republican, Democrat, doesn't matter.

But here's the key thing: As someone who is in the media, I can tell you that it's really easy to default to talking about Washington, and many of us like to do so. Why? Some think it is exciting. (I don't.) Others know the secret truth: It is easy because it requires very little homework. Anyone can have a view. You can pretty much state your opinion, and somehow that counts as valuable -- which is terrific, because you don't have to stress or read or give it a lot of thought. It's like a college bull session out there, for heaven's sake.

But the companies themselves are doing amazing things, and many companies are set up to do extraordinarily well, even if Washington does poorly. You would only know it, though, if you actually listen to the CEOs, talk to the suppliers and customers and get on those darned conference calls I am always telling you about. You can't really do that if you spend all of your time talking about senators and presidents and Medicare and "cliffs" and debt ceilings. 

One other thought about this theme, before I get to where the money is: Investors, traders, philosophers and journalists have all coalesced into a wall of obfuscation. They have settled into speaking in a binary fashion on pretty much everything. You hear them say "The market's going up," or "The market's going down." My own themes have nothing to do with "the market."

Worse, these folks jabber about "risk is on, risk is off."

That's just a total refuge for those who have no idea what the heck they are talking about, and the fact that I am the only one willing to call them out on it makes me feel real comfortable. That's because, frankly, it's very easy to fall prey to this binary thinking. It requires so little effort: "We will go over the cliff; sell." Or "We will bridge the cliff; buy." Or "The Fed's easy; risk on" -- and, yes, "The Fed has been getting tight; risk off."

They augment this lazy thinking by appending very "knowledgeable" analysis about the CBOE Volatility Index (VIX), which is another ridiculous insight. Do we really need a gauge to tell when there is a lot of fear? How about just watching the headlines and listening to people?

But that's what passes for intellectual market discourse, and by the end of 2013 you will all feel like me and know these people as charlatans, if you don't know already.

Charlatans? Yes. Because in the end, none of that drivel mattered.

I repeat: None of that mattered. It wasn't what worked and, ladies and gentlemen, "worked" is all that matters and all that will ever matter. We are trying to make money, not give lectures and not get awards for who sounds the smartest. 

Believe me, as I get older, I wish more and more that it weren't like this. I say that because my methods of looking at companies -- starting from the bottom up -- are so time-consuming and such a drag on my days that I wish I could become a "risk-on/risk-off" talking head. I would then have my set list of things to say and ETFs to grab and futures to sell.

But there is a judgment in the end, and the judgment is that this did not make you money in 2012, and those who try to get away with it in 2013 will find a discerning spotlight right on them -- from me.

Sorry, I have to do it. It's OK. It's been ages since I have been a bad boy, but I am surrounded by people who think and talk about risk-on/risk-off -- and, to reiterate, they don't know what the heck they are talking about. All they are doing is using shortcuts and lazy thinking, rather than doing the heavy lifting, which happens to be the only thing I know how to do.

So, with all that said, I have in mind 10 themes that prevailed in 2012. They're coming in with a huge head of steam in 2013, and you just need to use the government to give you the entry points.

Stay tuned.

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