For Those Wondering What I’m Thinking

It is inevitable if you indulge in commentary on the “markets”, whether good, bad, or indifferent, along with provide any reasoning that X, Y, or Z might occur, and A, B, or C takes place instead?  You’re going to hear about it.

So far, this week has been no different.

It seems the more calls for caution that I (or anyone else) expresses – the higher, and faster the “markets” vault. Maybe what I should do is proclaim at the top of my lungs “All is clear! Buy, Buy, Buy!! Worry, is for losers!!! After all, isn’t that what most are doing right about now?

Oh, wait, I’m sorry, what they do now (since many the reputation is still tarnished from 2008) is they throw the caveat of “This will end badly.” as some form of disclaimer should it all fall apart. You know, like it did in 2008 when they said it wouldn’t. Hint: Need I remind anyone of Jim Cramers’ famous Bear Sterns endorsement?

Nobody knows what these “markets” are going to do next. And I mean just that: no body. That is, unless you were one of the very few “friends of the Fed” which did know precisely that since 2012 when no one else did. Don’t remember? Hint: This was the period of time that no one believed the Fed. would continue the path of QE for years forward. That is – unless you were fortunate enough to be on one of former Fed. president Lacker’s conference calls back then where you would have learned precisely that. The issue was no one else knew until 2017 – that’s when everyone else found out – and he resigned.

Now, with that behind us, what we can at least surmise is this: If the Federal Reserve’s largess has been the responsible factor for most, if not all, of this so-called “bull market.” Then by reasonable assumptions, along with a little bit of common sense, it’s not hard to surmise what will happen when that largess is withdrawn. e.g., Things are about to get “jiggy.”

Trying to predict precisely when, as for week, day, time, and second, is a fool’s errand. All one can do is be prepared the best they believe themselves to be, then work with what comes before them. That’s it. The only known factor currently is that process (e.g., normalization) begins this month, at a pace of $10Billion per month, increasing in subsequent months as the schedule unfolds.

As far as the “markets” propelling ever higher as of this week? Well, there are two factors to remember. 1) As I said last week: “end of month, and quarter window dressing is more likely at play. 2) Earnings begins, and exposure to it begins in earnest also.

I believe what you’re seeing now is relative to that conclusion. Can we go higher? Sure, probably will. Can we drop like a stone out of nowhere? Yep, that’s certainly possible. And no, I’m not trying to have it both ways, for here’s how I answered a collegue when I was asked my thoughts earlier today. To wit:

He: “What do think?”

Me: “I don’t think anymore, I stopped trying to reason or rationalize what these “markets” do from day-to-day anymore. Nothing makes sense, it’s just a battle of algos vs algos at this point.”

He: “Do you still think this market is set up for a fall?”

Me: “More so today than ever.”

He: “You know, you’ve been saying that for a long time and it hasn’t happened. What if you continue to be wrong for even longer?”

Me: “Fair point. But let me ask you this. If you get a 5% sell off, will you be a seller or buyer? If you’re a buyer and it falls another 5%, will you buy more, or begin selling what you have? If it falls another 5% what then?”

He: “I haven’t thought that far through, yet. I’ll just have to wait and see I guess.”

Me: “That’s the problem. And will be your biggest problem going forward. You’ve never even had to think about that in years. And the scenario I just gave you used to be common, but now, it’s considered an outlier. Yet, that’s an easy scenario. What would you do if it went down 15% in one fell swoop, what then? Buy? Sell? Hold? You don’t even have a plan for the easiest scenario, and what was once deemed ‘normal’ market behavior. How do you think you’ll react if it’s the latter? Or, better yet: What do you think will be the reaction of those who presumably know even less about the ‘markets’ than you do?”

He: “You s-ck.”

Me: “Thanks. I love you too. But that’s why I’m saying it. Again, it’s up too you to decide what aspects, or degree of caution, works for you, But at least you need to truly give it that thoroughness of thought, because the stakes as of this month have changed. Not by someone like myself trying to access what may, or may not happen via Fed. innuendo. The Fed. itself has now dictated precisely what is coming due. The issue for the ‘market’ now, is trying to figure out if it can afford it or not. My assumption? It’s going to be surprised just how much this final bill due may be. Much like how no one cares how much those bottles of champagne ordered in the V.I.P. lounge costs, until suddenly, the ‘credit card’ gets rejected and you have to come with cash immediately – or else. That’s what I think these ‘markets’ are set up for.”

As always, what you do with the above is entirely up to you. But at least you know what I’m thinking. And again, as always…

If anyone tells you they know precisely? Don’t just walk, but run, and fast.

© 2017 Mark St.Cyr