Tuesday, August 28, 2012

"Dick Bove: Ignore Fiscal Cliff, Buy Stocks"

I'm not sure "ignore" is the term to use.
Perhaps "don't be blinded by" or "assign a lower weighting to".
Not "ignore".
From CNBC:
Investors appear unwilling to make big bets in either direction ahead of a hotly anticipated meeting of central bankers at Jackson Hole, Wyoming, on Friday.

Stocks have rallied in recent weeks on growing expectations for a third round of quantitative easing from the Fed, as well as possible action from the European Central Bank.

News from Jackson Hole could determine whether the summer rally that drove the S&P to four-year highs is sustainable or not.

According to widely followed bank analyst Dick Bove of Rochedale Securities if history is any indication, the Fed will make a move.

"The Fed provides seasonal easing this time of year," said Bove on CNBC's Kudlow & Company. "And they do it because of the holidays."...MORE
Well he's outed himself as a calendar freak.

Back when Eastern banks loaned money to their Midwestern country cousins who in turn lent it out to farmers until the autumn harvest, there was indeed a seasonal flow of funds.
These days not so much.
April 15th excepted.

Because our readers are intelligent, funny and good looking I won't belabor the point but must at least state it:
Any seasonality will disappear as more and more investors make their purchases earlier and earlier.

Anomalies do exist and some persist for years but this is simply because markets are both complex and chaotic systems. If there are excess returns it is because we haven't, for whatever reason, quantified the risks.
As far as I know the anomalies can't be arbitraged away, so to speak of arbs in this context is nonsensical.
The best you can do is some variation of "Time Arbitrage" which isn't really an arb but is a real tool to be aware of.

For more on anomalies see CXO Advisory's search results for "Anomalies", a good start for anyone interested.