I know there are thousands of you who are technical wizards at charting or what is now known as T.A. (technical analysis) Myself, I’m pretty adept. Like many I decided to take over my own finances when the so-called “experts” back in late 2007 early ’08 proved without a shadow of a doubt they had absolutely no clue.
So like many I’ve read the books, went to countless classes, and have had the added benefit of reading or listening to the thoughts of many that post right here. Although one might not agree with every viewpoint or conclusion given. The reasoning behind the “why” for their interpretations is (in my view) the most important part.
So with that said I would like to take a break from the usual and just share a few thoughts and analysis. (T and A) I offer this because I believe many of us just need a break from the screens, talking heads, or politicians to just have a moment to express some thoughts away from the beaten path. It’s a New Year, so with a coffee in hand here’s a few things like the song: “Makes you go hmmmm…”
Anyone whether Bull or Bear if they’re honest with themselves knows that since Bubbly Benny B’s. (Ben Bernanke) now infamous Jackson Hole speech was delivered, if you’ve been a short side player you have been targeted as “The enemy.”
As much of a mantra as “Don’t fight the Fed” has been for many on Wall St. One has to think part of the reason why HFT (high frequency trading) has not only been allowed to operate – its been allowed to flourish for the explicit reasoning that it crushes (not hurts-but crushes) shorts. Some might say: “Well of course, and glad for it!” However, what happens when there are no longer any “shorts” Per se in the markets?
If one follows the open interest of just the CME (Chicago Mercantile Exchange) S&P large contract on a daily basis. One can’t help but notice the volume of contracts willing to be held over night has not only diminished. It’s near pitiful.
The S&P 500 is currently at levels (laughably yet true) not seen since 2007, and any hedge fund manager with the possibility of $1 available in redemption by investors (the horror!) will scream: “See -Buy and Hold works!” Yes it did. However, 2/3rds of the traders, investors, and more that should be here taking advantage of that “Buy and Hold” strategy – are gone.
As we hit new highs this week the open interest hardly broke 160K. Yes it went a little higher, then a little lower. However, what’s troubling is this figure used to be in the 500K to 600K range all the time. This should be a concern for anyone Bull or Bear.
How many professionals that made their living trading were themselves wiped out with the MF Global debacle let alone anyone else? For those that were fortunate to have a different clearing house. Does one think they didn’t take notice? That they themselves didn’t “alter” what is in the market at any given time? It has implications. We just might not be fully aware of the dangers if any as they have yet to reveal themselves. Never the less to think there won’t be – or there aren’t any – is fool hearty at best.
Another thing one hears all the time is “Money on the sidelines” or “The risk trade is back on! Just wait till the bond market really starts moving down.” Sounds logical, but not so much if you think about it from the view point of the 50 year old and over John and Janie. The future retirees that lived through 2008. Never mind the 65 and older group already retired.
This is the exact crowd that made the markets what they were going into 2007. Pushing more, and more of their income into the markets as little Jimmie and Julie left home. Sure some took on more debt. However, many more were able to pay for a great part of it by just refinancing or flipping their former homes. The paycheck for a great many was (as laughable as it sounds today) “extra.”
Increasing that 401K contribution by 25% was no skin off anyone’s nose if you could flip your home for a 10% gain yearly. (and that’s being conservative) Not only are they not contributing at the levels they once were – they’re cashing out. Putting money in the Sealy Mattress® Bank and Trust for many is a whole lot safer than anything they care to think of. No matter what anyone says – you are not going to change this groups mind. Period.
For those that are currently in the Bond markets because they didn’t know what else to do during the melt down. Every so-called market maven or talking head is trying to convince them to come back into the markets with the reasoning that: “Well you’re not earning anything.” I personally believe this falls on deaf ears. I’ll use just one example to ponder. How do you think the few they convinced to move out of bonds into that safe bet of Apple® to $1000 a share are thinking?
So the bonds go down 2% and the “smart crowd” scramble for the cameras panting “See! See! You need to be in stocks!” However, what would it really take for someone who went through 2008 and watched 60% of their wealth disintegrate within months before their eyes? Does one really think a 10% or even 20% loss in bond prices would be un-nerving? Again, let alone the few early birds that took that killer investment advice and jumped into Apple at $650 – and got killed.
And even if that weren’t the case. How many of you think this conversation is not only possible but, more likely probable?: “Hey Martha, I’m getting us outta them there bonds and getting us back into stocks – What d’ya think?” I’ll bet you she’ll be thinking divorce lawyer not investment adviser.
Then there’s what by all accounts is not only laughable – It’s crazy!
There was a time when such a thing as fundamentals or other long since proven ideas actually worked, and were actually taught or followed in business, academics, and yes – even the halls of congress. Yet, that is no more.
We at one time worried about the value of our currency. The implications of where it was as opposed to others dictated what items were on a valuation or competitive standpoint between nations. It also was a reliable indicator for whether you were on the right track or wrong track economically. Oh my friends those days are long since gone.
It seems not that long ago (yet in dog years it feels like decades so I’ll use that) a nation’s currency was backed by something. Even if it was only the “implied.” Now It’s no longer a question of what it is rather whether or not we get it in some form of: “A full Monty!” – literally.
Just as men have been exaggerating about their private parts to anyone that would listen. So too have the Central Bankers, politicians, et al.
No longer does one need to show a “bazooka.” One only needs to imply that they have one, and will use it if called upon. Much like every teenage boy without a date for the prom. The troubling aspect of this banter is that it’s now taking place across nations, and nearing the high pitch screams of a Justin Bieber concert.
First there was Hank Paulson’s T.A.R.P. then to Bubbly Benny’s QE dot 78.94, followed by Europe’s Monty cabal with their shouts of “We’ve got it, and don’t dare us to unzip.” To now we have Ole Honest Abe of Japan announcing he’s decided his country is going to put to rest any of those old rumors about – (well you know need I say it?) and going to compete on the world stage right along side every other world bank in some troubling adaptation of “It’s a chorus line.”
Then we have what just might be the worst of timing from someone for whom many think this is just “brilliant” as to throw their two cents in (Or should I say Trillions?) Paul Krugman. The Nobel Prize winning economics professor.
He seems to just love the idea of the U.S. government minting a Trillion Dollar coin made from platinum as a way to get around or circumvent the fundamental laws governing the nations currency. What is so scary about this line of thinking let alone the the absurdity of it at face value?
Just like that teenage boy bragging about what he’s keeping out of sight for that “special moment.” What happens when they meet someone who actually has the guts to say: “Yeah – Is it anything like this?” Or worse – It’s actually “That special moment!”
Both scenarios don’t end well for the bragger. And I hear nothing but a lot of braggers across all media. They better hope no one calls the bluff or we could be in for a very lonely ride back from the dance without the one that brung us.
© 2013 Mark St.Cyr