Weekend Reading – Massacre or Mutual Fund Monday

Feels like 2008 all over again doesn’t it.  Monday morning is going to be very interesting given that we are back to politics in Washington creating volatility in the market.  For a while there the focus was actually on companies, ironic that $IBM $INTC and others are blowing out earnings, top and bottom line, and now the market smacks them in the face.  Always remember that it’s not about what they earn, it’s about how the market reacts to the numbers, unless you are a value investor, have some crystal ball that tells you how many widgets said company will sell, at what price, and at what cost.  I didn’t think so.

Look, we are dealing with a three headed political mess.  One, healthcare reform is up in the air.  Who knows if this is going to get passed, the market voted and they don’t like the uncertainty.  But I would advise to lay off using this as an excuse to sell everything or get short in size.  Two, it look last week like Bernanke was going to have a hard time getting confirmed.  This fear was put to rest this morning as leading Republican senators said they will get him through.  The market did not like the uncertainty surrounding his reappointment one bit, if he goes, so goes the asset reflation scheme and the whole fed strategy.  As you know I was and will continue to be an opponent of the asset reflation farce, but if you people want the market going up, well there’s no other way.  Third, ‘bama needed to find someone to point a finger at in order to take the spotlight off his complete and utter failure to do anything.  I’m a huge fan of the guy, he’s an intellectual, he’s a pragmatist, he’s many great things, but what he is not is a leader.  He’s failed at every large initiative and now looks so lost that he’s playing the populist game trying to demonize Goldman Sachs for being good at what they do, trading.

Here’s the play book.  Obama will fail at any meaningful financial reform just as he has failed at everything else, because he doesn’t have an original thought of his own, or enough leadership ability to put a team in place that would come up with real solutions, which we need, and then put the weight behind it that is needed to pass the legislation.  $GS is valued at a 7.5 P/E, that’s fucking crazy, it’s discounting for a complete and utter failure for them to make money going forward.  Would I take a large position right here, no.  Would I write some puts into this fear, hell yea.  $GS has good support right here from the June highs.

As for the rest of the market, we will bounce in short order.  If the bounce does not recapture the yearly highs, it will signal a larger bearish pattern.  Remember that major tops take time, it’s not an event like last week, institutions will support price so that they can distribute stock to idiot retail investors in passive funds.  We’ve seen round one of bearish patterns resolving bearish, this should be setting off sirens of caution in your head as to the structure of the market.  If we recapture the yearly highs in the next two weeks I believe we see 1200 quickly, very quickly.  The major indices are below their 50 day moving averages, this is another sign of caution.  And third, major leadership names have been under performing for a little while now.  Yes, rotation happens in a healthy market, but if investors start to shoot the high momentum names one by one the market is in trouble.  IBD has chanced their market forecast to “in correction”, although I don’t subscribe to owning stocks based on whether they are on the list or not, they do have a good track record of calling market direction and keeping you out of big declines.  This week will tell us a lot, how high will the bounce be and what issues will participate.  I will look to load up on Monday morning if we open strong and move to a much more defensive cash position mid week either way, and wait for more clues.  Let the price action be your guide.

Here is your weekend reading:

How are bank and brokerage analysts looking at the finger pointing from ‘bama (Financial Times)

It really is depressing how little Obama has accomplished and how much of a failure his presidency is becoming, I’m still rooting for him though (US News)

Great post on the Chart.ly Blog from @zortrades, the market is going to bounce, have a plan in place (Chart.ly Blog)

What happens when more than 90% of $SPX issues are below their 10 day moving average (JackDamn)

I’m long and very bullish on the tower companies, so are a bunch of major hedge funds (Market Folly)

I just can’t get on board with the complete obstructionist view of the tea partiers, I’m joining Friedman’s start up party (Tom Friedman)

A really great look at many different market sentiment indicators (Trader’s Narrative)

Iran will pull out from the NPT, build a bomb, and then rejoin, sound familiar, say like, ohhhh, Pakistan (Thomas Barnett)

It’s not hard to see why certain players in Latin America are winning economically and some are not, Chile on the right track (Washington Post)

As I said, there’s a better chance that Goldman Sachs goes public than you think (Bloomberg)

If you invest with an active asset allocation strategy, I would highly recommend putting a portion of your high beta equity capital in the Vietnam ETF (The Reformed Broker)

I’ve been saying this for a long time, economics will almost always drive politics, the China / Taiwan war fear was always a farce because of the economic connectivity they shared (WSJ)

I am so fucking fed up with Time Warner Cable, when their death is imminent, I will buy 10 shares and take delivery of the stock certificate just so I can crap on it and then burn it, I can’t wait for the day that their business model is destroyed by Apple (sorry for the vulgar language) (The New Yorker)

Natural disasters have an interesting way of becoming engines for economic development (WSJ)

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