When There is Too Much Cash

Pythagoras was a Greek philosopher and leader of a cult that bore his name. It's hard not to see parallels between him and the Wall Street crowd that lives and dies by the numbers. Of course Pythagoras and his followers were a lot more disciplined than the folks that huddle each day in the canyons of lower Manhattan. They were strict vegetarians and amazing mathematicians. The Wall Street crowd believes in thick, rare steaks, and all the fine wine that goes with it and their math is fuzzy at best.

Pythagoras' cult prayed to the tetratktys, or first four digits.

* One - represented reason
* Two - represented argument
* Three - represented harmony
* Four - represented justice

Then there's the famous theorem that made Pythagoras a household name even to this day. He was so excited upon proving his theorem Pythagoras sacrificed a cow (I said they didn't eat meat but it didn't stop them from having fun). When we examine the stock market rally, we have to take into account the four digits from the Pythagoras belief system. The one that bothered me most yesterday was "reason." The big news (according to news types that have no clue about how to make money) was Yahoo buying Tumblr for $1.1 billion. A deal some would say there was no rhyme or reason for considering the price tag.

I can't call it yet, but it seems like a high price to pay, but I've watched names like CSCO and MSFT languish for years in part to holding on to too much cash. In that regard I think it was a smart deal. Then there is reason with respect to the broad market rally and its justification. I've gone along with the idea the rally is justified and still think there are scores of individual stocks still cheap enough to own - especially if you can catch a dip. Still, you are going to get arguments on this from smart people, angry people, people who have no clue and people that simply want to see America fail.

Part of the problem is that there is no harmony. It would be so much easier if the economy was generating 300,000 jobs a month, factories were being built, and the Fed didn't feel obligated to pump in $85.0 billion a month. Yet stocks zoom. Stocks are higher even as GDP growth barely stays above water. There is no harmony between the stock market and the US economy, but with Tim Cook heading to Capitol Hill today to discuss corporate taxes we are reminded that many of the biggest publicly traded names make more money outside this country than inside.

Poetic Justice

Surely as the divine powers take note of the dutiful,
surely as there is any justice anywhere and a mind
recognizing in itself what is right, may the gods
bring you your earned rewards.
—Virgil

Finally there's the issue of justice. I watched the market move mostly sideways for years after the 2001 market crash, ignoring amazing profits as investors had licked their wounds and moved on to the housing bubble. That same bubble took stocks down even more, aided by bumbling lawmakers that bailed out failed businesses in the name of a soft landing. Well, it was anything but soft and took another giant chunk of confidence from the investing public. Now those same investors are coming back to the market hoping not to get hammered again.

The haters would love to see investors troop back into stocks and get scorched again to teach them a lesson. There really are some out there content to have missed 9,000 Dow points because such profits are unethically based on Fed money printing. It's not good enough for them to miss out, but they resent the public not worshiping at their altar of fear. Yes, there are so many things wrong with America and we are on that well-worn path of Greece but we are still America - for now. I suspect reluctant investors just getting back in the mix will be tested soon.

I can say already many will fail based on some comments I heard yesterday about the fact a couple of our buy and hold ideas haven't moved up much - since last week.

Beyond the stock market, the nation is dealing with a series of scandals that will test our belief in Justice when it comes to the highest powers in the land.

For now, I think there is an element of justice to the rally for those of us that have dealt with the long trip of indifference and near death.

Conclusion

If Wall Street was only about the numbers on a day to day basis the market would be easy, but it's about emotions on a day to day basis, trust on a day to day basis, consensus on a day to day basis, and hype on a day to day basis. Yes, there is a lot of public information, but the public is severely uneducated about the market in general and even names in their portfolios. Numbers do matter in the end, and it's that plus the human element to make those numbers happen again and again that eventually determine the fate of stocks.

I think the market, when it's not reacting to exogenous forces and events, does rely on reason, argument, harmony and yes justice, too.

War on Capitalism

Yesterday, Tim Cook had to explain taxes and expenditures to a bunch of Senators and give a reason why Apple loathes bringing overseas profits back to America. The richest company in the world actually has more -real- money than the United States government, yet they want to scold him on how to spend the riches that belong to Apple shareholders.