• We’re in this very odd portion of the year where volume slows to a drip and complacency easily settles in as money managers chase performance and investors lose the incentive to take action on their portfolios.  Thus far, strategists such as JP Morgan and Jeff Saut at Raymond James have been correct in saying that there is limited downside into year-end as money managers will continue to buy the dips.  As Q4 earnings season is right around the corner in late January, is there the potential for no sustained sell-offs as money managers buy the dips into year-end and then anticipate another solid quarter of earnings?  I think that might just be the case.

• John Hussman is on point as usual in his latest missive. He says stocks are decidedly speculative at the current level.  Periods in which stocks were this overvalued tend to produce very poor long-term returns:

“In short, any virtue of stocks here is decidedly speculative. Stocks are overvalued to a level from which uninspiring returns have always followed. That fact is true regardless of whether or not the economy is in a sustainable recovery.”

• The Exxon/XTO deal is more good news for the market as it’s a clear sign that credit markets are healing and risk appetites are coming back, but why do these deals always occur after the market has rallied so much?   Like the private equity boom of a few years back, you have to wonder if massive deals such as this one aren’t contrarian signals….