Lest we get all giddy with superfluous delight and intoxicating gaiety, let me remind you that we are still in a bear market….Libor has increased for the eleventh straight day, Japan’s property values continue to sink into the Pacific and Bernie Madoff faces life in prison. (OK, so maybe it’s not all bad). But enough of that “negativity”.
Today is a day worthy of celebration. You may now throw away all the sharp objects you’ve been collecting over the past 2 months. Celebrate! Heck, everyone else is, much to the chargin of the greedy bears.
It was a very pleasant day. I felt like a kid that was let out for recess in front of the carnival. Quite fascinating to be buying worthless trinkets and gorging on cotton candy again!
On a purely intuitive basis, I believe we have entered into what may be the beginning stages of the “Rally Zone”. So, put away those stupid funnels and pay attention…
Let me make this as non-technical as possible. Several points are worthy of consideration:
1. Going into today, the market was extremely oversold. Period. The smart bears got out yesterday, or even last Friday. The dumb bears got their heads lodged in the honeypot today, and got beaten with kiln-dried hickory axe handles. Fully 1% of my stock database of 7,823 stocks was green. The fear was palpable. That was a clear sign to go Constanza on this market at the open. The shorts deserved what they got.
2. The cash levels have been hovering around 100% of the market cap of the NYSE. In fact, CEOs of major banks sold their stocks at the bottoms last week…..(Nah, just kidding. But I wouldn’t doubt if they did).
3. The small investor has been redeeming his bullshit mutual funds that are down over 60% from a little over a year ago. Why he waited until now is beyond me, but hey, that’s his job as an unpaid contrarian indicator dude.
4. Fund managers with itchy trigger fingers have been bemoaning their losses so far this year, and are suffering egregiously. They’re having to eat beanie weenies every other night for dinner, since their expense accounts have gone by the wayside. But now, behold! An excuse to deploy bucketfuls of cash into beaten down stocks has materialized, thanks to rumors of the dreaded return of the uptick rule. At the very least, managers risk getting fired if they fail to “average down” their holdings (or so they think, not knowing that fund “outflows” are proxies for pink slips).
I do not know for sure what will happen tomorrow, as I function under the basic principle that the future is uncertain without use of The Fly’s time machine. That said, I sense that we will get follow-thru tomorrow, and perhaps the rest of the week, if we are so graced. This in-depth analysis is based on my quick and dirty reasoning outlined above.
Today, I went from 100% cash to fully invested. Yes, I’m all in, unlike probably most of you.
What the Hey, it’s only greenbacks with pictures of dead Presidents….. and a balding womanizer….and a Secretary of the Treasury, I think. Anyway, like I said, I’m all in—but not how you might think.
My current allocation is a 50% equity basket, 5% fixed income basket, 25% currency basket, and a 20% commodity basket. I have no cash. I dumped cash. I loathe cash. It pays me no tribute. (I’ll post the details in The PPT later tonight.) In case your wondering, I’m into “baskets” now, since we are getting close to Easter.
My 2 cents is this:
Strike while the iron is hot. Buy into this rally tomorrow, if it shows signs of follow-thru. However, if you do decide to ride this fabrication of a rally, stay disciplined and use good money management. Recognize that Mr. Market seeks out the weak and uninformed participants, and extracts the most money he can from their loose, well-manicured weak hands. He may even try to shake you loose and pry the coins from your sweaty, greasy fingers, but resist him. Great reward is accompanied by great risk. Act like you got a pair. Keeping buying. Keep hoping against hope that despite a shitty economy, lack of leadership from Washington, and a broken financial system, you are still adept at milking profits from a dead white rabbit (even if it makes absolutely no sense to try to do so).
Yes, I do believe that I’ll have another ribeye, thank you.
You may now go about your business.
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