Market Pulse: It’s all about TINA
March 14, 2013
INCLINE VILLAGE, Nev. — Last month three preferred stocks that I own in client portfolios were called back from the issuing company. Businesses are, in effect, refinancing at lower rates. There are still selected opportunities in the preferred market, especially in adjustable rate securities, but the list is getting smaller. That is why stocks are rising. It's about TINA, which is short for "There Is No Alternative."
For investors buying stocks, TINA sums it up, as you've been reading here. TINA, more than valuations, earnings growth and the macro economic picture, is powering stocks higher. And it will.
This bull run continues with only small and very brief pullbacks. "Buy the dips" has been good advice since the start of this bull market in March of 2009. For most of the past four years TINA has been the driving force. CDs, munis, Treasuries and cash equivalents simply don't measure up. There is still a mountain of cash on the sidelines and investors will tap it and buy stocks. After all, there is no alternative. There is another factor at work. Cash-rich corporations are buying their own stock and adding to existing buyback programs. Some are buying not only their own stock, they're buying other companies. Berkshire Hathaway agreed to buy Heinz for $28 billion. American Airlines and U.S. Airways are merging. Merger and acquisition activity (M&A for short) is picking up as companies put more of their cash to work. Dividends are rising, too. Those are positives for the stock market.
It is nearly always the case that one or more obvious problems crowd out less evident positives. I could write a book about all the negatives and their potentially devastating effect. It might even join the long list of best-selling books predicting doom. For this column, however, I've focused on the positives. One reason was that I didn't believe the worst-case scenarios for the simple reason that they were in no one's interest. I am not at all surprised that none of those came to pass and investors who focused on the most-likely case were very well rewarded. And they will be.
David Vomund is an Incline Village-based fee-only money manager. Information is found at http://www.ETFportfolios.net or by calling 775-832-8555. Clients hold the positions mentioned in this article. Past performance does not guarantee future results. Consult your financial advisor before purchasing any security.