Institutional Investors missed the boat….yet again!

Just back from a nice ride on a rented Harley-Davidson motorcycle (in beautiful Arizona), I can’t say that I’m back in the swing of things just yet, but it sure did clear my head.

Oh, and an occasional break does remind one that closing out options which are about to expire is wise before you travel (I had some contracts on Juniper Networks)….an expensive lesson.

Every so often I can’t help but translate what I call PM-speak (portfolio manager bunk) into English for the benefit of those less used to the investment industry. I read the following quote today and it will serve as as a great example:

…… managing director and equity-income specialist at (no need to embarass them), says that she and her colleagues have become less defensive over the past several months in their high-income portfolios.

“We have shifted to a more neutral stance, given the unexpected resilience of the U.S. economy and a global economy that is doing better than many anticipated,” she says. “But given the ongoing macroeconomic headwinds, we are not in the pro-cyclical camp.”

TRANSLATION: We screwed up….missing a rally in the market.

If you’re not familiar with the robust 1st quarter (easily anticipated – scroll through some old posts on my blog) here is a chart I posted recently in Spread for RISK narrowed; as predicted!

Income ‘products’ (funds, structured funds) are now selling like hotcakes, but as usual what sells well is higher risk. Income performed “LAST” year….and belatedly is attracting investor attention. No shortage of offerings coming out but fund companies are businesses after all….sell the people what they want, not what will make them money. There’s a high probability that short term rates will begin to rise (long rates have already begun to) hurting all income paying securities.

Hold on to your cash and some growth stocks….if there’s a summer rally (few and far between, but it happens) the stocks will do well, and if there’s a correction caused by rising rates throw your cash into cheaper stocks during the ordinarily slumpy summer months.

And on occasion, take some time to clear your head! Play safe.