This is garbage. The start to 2015, I mean. I'm not talking from a personal performance standpoint either as I have avoided ice skating in molasses through the act of being long a group of names that are outperforming through the first few weeks of the year. WMIH, IMH and KFS make up a bulk of long exposure with a significant possibility of it remaining that way for a long time to come. The reasons why are rooted in the fact that outstanding risk/reward opportunities simply do not exist in this market any longer. You are giving up a significant degree of risk to achieve a reasonable gain. Not the type of odds deserving of capital.
As for the garbage that has managed to seep into the veins of the current bull, it comes in the form of disobedience in the face of strong seasonal tendencies. You see, these seasonal tendencies, of which the vaunted January rally following a strong year for the market ranks high, have rhyme and reason behind them. They are not simple random events that just happen to occur during a specific time span dictated by a the flipping of the calendar. When rhyme and reason fail then the astute observer of the markets must ask the question, what could it be that I may be missing?
It is similar to the spouse who comes home every day at 4:30 and the one day, without warning, decides to show up at one in the morning. The sudden, unexplained aversion to natural tendency cannot simply be dismissed. Odds are that something is brewing beneath the surface.
So the market in its wanderlust has decided to avert itself from a positive January, instead performing a volatility dance that is unpredictable in nature and frustrating to those involved. Of specific concern is the Russell 2000 given that January is supposed to favor small-cap names as investors put money to work in high-beta outperformers. It's simply not happening.
There are a million reasons as to the possibility of why? I'm not here to act like I'm smart enough to pull the "why" out my hat. What I am here to say is that anomalous behavior shouldn't be dismissed whether on the macro or micro front.
What we have here is an anomaly across multiple asset classes that is deserving of a perking of the antennae until we are given more information.
Until then, stay nimble.
