I know I’m sending this from my work address and your organization usually only serves the consumer market, but our analysts here at Pinnacle have worked very, very hard this year and have been very good. If it’s OK I thought I would ask your elves to make a few special gifts for us this year, over and above the toys and cookies in your sleigh. I don’t mean this to sound the wrong way Santa, but the first thing on our Christmas list this year is world peace and good will towards men. I know you get asked this all of the time, but I figure at $55 of normalized earnings for the S&P 500 Index, world peace has to be worth a multiple of 50 times earnings which means the stock market would rally to 2,750, a gain of about 120% from today’s prices. I just saw Miracle on 34th Street for the fourth time this year (I love that movie, Santa) and I know how hard it was to get the little girl a new home and a daddy, so maybe world peace is a little stretch for this year….but I thought I would ask.
The next think we want for Christmas is low correlations, Santa. I don’t know if your elves can build low correlations in their workshop with such short notice before Christmas and it occurs to me they might not know what low correlations are. Correlations measure how the asset classes in our portfolio move versus one another, and when correlations are low asset classes zig and zag at different times and that reduces the volatility of our portfolios. You see, Santa, if we know correlations will stay low than it’s easier for us to add risk assets to our portfolios so that we can make our clients more money in this bull market. They’ve been good boys and girls too, Santa (…I’m just sayin’), so if your elves are a little confused with this low correlation request please have them send me an email and I’ll explain it to them.
Our last Christmas gift would truly be miraculous, Santa. We would like all of the unemployed people in the US to get jobs and go back to work and be happy. At the same time, we wonder if your elves could kind of make Ben Bernanke, our Federal Reserve Chairman, not worry about this upsurge in employment. You see, Santa, if Ben Bernanke sees everyone go back to work then he is likely to raise interest rates and stop buying Agency and Treasury bonds in the open market. He might even begin selling some from the Fed’s balance sheet, and we know stock investors are going to be upset if the Fed begins to tighten their monetary policy. So please see if maybe your elves can do something about this as well.
It’s time to go, Santa. We are going to leave cookies and milk by the door of the Pit for you this year just in case you get our letter. We want to wish everyone a happy and safe holiday!