Following a horror start to the new year, the S&P 500 reversed course overnight, rising 1.1%, its biggest gain of the year.
Oh, how quickly investors change their tune!
As if to highlight the fickleness of the markets, Martin Leclerc, told Bloomberg…
"We're probably at the stage in the stock market cycle where good news will continue to be seen as good news."
Investors are a funny lot. Surely it's the only profession in the world where good news can possibly be seen as bad news.
Mr Leclerc added…
"I would say that after this massive move we've had, it does feel like the animal spirits are still resurrected."
Phew.
It seems yesterday's "wake up call" can be confined to the scrap heap of the hundreds of other days when markets fell, past, present and future…
But yet recovered to send global stock markets back to all time highs.
Yes, Foolish reader. The bull is back… today.
As for tomorrow, who knows what's ahead? Something dramatic? Or maybe just one of those trading sessions where some stocks go up, some go down, we shake it all around, and we all live happily ever after.
It would NEVER happen to BHP
In another sign the panic and uncertainty of yesterday could have been an isolated event, shares in chip maker Intel rose 4% after analysts upgraded earnings forecasts.
For a plain old vanilla analyst upgrade, that's a rather big jump for a $132 billion company! I can't quite see an analyst upgrade having the same effect on BHP Billiton's (ASX: BHP) shares!
I could however imagine the effect on my Nearmap (ASX: NEA) shares should a friendly analyst upgrade earnings forecasts for the $195m tiddler of a company I mentioned yesterday? By coincidence, Nearmap's shares are up 5% today for reasons unbeknown to this scribe.
I've no complaints of course, and might even celebrate the tiny win with a cool beverage this evening.
An intoxicating brew
Speaking of which, the US continues to print money, to the tune of US$75 billion each month, although Philadelphia Fed President Charles Plosser has told Bloomberg that the stimulus program should end later this year, as the US economy picks up growth.
Richard Fisher, US Fed president in Dallas, has likened the US quantitative easing to 'beer goggles' that makes everything look good, saying on Bloomberg…
"We have made for an intoxicating brew as we have continued pouring liquidity down the economy's throat."
Cheers for that, I say. Whatever Mr Fisher might say, the good news for investors like you and me is the 'beer goggles' remain firmly strapped on, and cheap money and low interest rates are here to stay for some time yet.
Yes Fools, the bull is back in charge.
A heady combination of "animal spirits", analyst upgrades and "beer goggles" could see 2014 shaping up as another good year to be invested in stocks.
Who knows, Bell Potter's Charlie Aitken's target of 6,000 could be at risk of being too low?
Time will tell.
But what does seem certain is that we'll likely have a little more volatility in 2014 than we had in 2013, when oftentimes it felt like markets were going up every single day.
Make volatility YOUR friend
It seems J.P. Morgan Global Market Strategist Andres Garcia-Amaya agrees, telling Fairfax Media…
"We're seeing a good preview of what the year will bring, which is a little bit more volatility."
Bring it on, I say.
Volatility is the long-term investor's friend, allowing us to pick up stocks on sale. Learning to embrace volatility will make you a better investor, Foolish readers.
If you hold quality companies in your portfolio, there's no need to check your performance on an hourly or even daily basis.
Doing so may make you feel like you need to get in quick and sell before the price goes any lower, especially if one or two of your stocks are down substantially.
Having patience is one of the hardest things to do when it comes to investing.
If it's good enough for Warren Buffett…
As Warren Buffett has said… "I buy on the assumption that they could close the market the next day and not reopen it for five years."
Forrest's Fortescue charges ahead
Andrew 'Twiggy' Forrest's iron ore play, Fortescue Metals Group (ASX: FMG) is one of the top gaining stocks on the ASX today, despite the iron ore price slumping below US$130 a tonne for the first time in six months. Shares are up around 4% so far today.
Fortescue has announced that it will pay off another US$1.6 billion of its debt by March this year, despite not being due to pay it back until 2015 and 2016. The iron ore miner's US$12 billion debt pile is rapidly reducing, and will soon stand at around US$9 billion, once the March payments are made.
If the iron ore price holds up, Fortescue could soon be able to reward shareholders with dividends, given its prodigious cash flows.
If not, look out below…
Do YOU feel lucky?
And that's the bet with a heavily indebted company like Fortescue. The upside is substantial, but so is the downside.
You won't find Fortescue on Motley Fool Share Advisor's buy recommendation list anytime soon.
As Motley Fool analyst Joe Magyer said last year….
"Their debt load is tremendous. If iron ore gets hot, it's possible shareholders will do very well. But if it goes cold, they'll get hit. Hard."
And CLSA analyst Andrew Driscoll has told The Australian Financial Review that he expects iron ore prices to fall dramatically in the second half of the year to below US$100 a tonne.
That could spell big trouble for Fortescue and Twiggy.
While that may sound negative, nothing could be further from the truth.
Here at the Motley Fool, we are optimists, and wish Twiggy all the best of luck and want to see him succeed.
But it still begs the question: Why swing for the fences when there plenty of other cheap, growing, cash-rich companies paying fully franked dividends out there on the ASX?
The top ASX pick you've never heard of…
Top Motley Fool analysts just identified their #1 ASX pick for 2014, a small cap stock that could be poised for big gains (and offers a fat, fully franked dividend!). Discover all the details now, including the name and code, in this FREE investment report, "The Motley Fool's Top Stock for 2014."
