Closing Comments

The bulls dodged a bullet today. Frankly, I was expecting a bigger selloff at the close.

So, here we sit, on pins and needles, in front of our computers and plasma HDs, carefully weighing all the numbers and “spin”. Did it ever occur to you, that this all could be a conspiracy to get us addicted to CNBC and subscribe to Bloomberg, Thompson One (or some other data service of your choice)? Far fetched? Most likely. But, don’t rule out that we might be living in The Matrix.

No matter, my sense is that most of you out there are slaves, yearning to be free from vile servitude to this worldy endeavor of market trading, once your net worth achieves “The Number”. As you consider that sobering thought for a moment, think about what matters to you most in life, and how really important “The Number” is to your existence. (Some of you might take a while on this).

Would you rather be wearing sun glasses, sitting on some white sand beach, guzzling Mojitos during Spring Break? Or would you rather keep trading in TNA from a sleazy back office with track lighting? Or perhaps, some other form of distraction? 

If you’ve been daydreaming about some other life, filled with garbage bags of cash, snap out of it. You’re probably not there yet, since you’re dreaming about it.

Time to get to work. Focus on the task at hand, and recognize that you may soon be separated from the dollars in your trading account on any given day.

You see, my friend, the market thrives on fear, greed and deception, or at least, the average person’s lack of control of these emotions and their lack of perception. Mr. Market is adept at extracting the most money from the most people who are the most ill-informed and the most undercapitalized. Most egregious, but comical to those who understand how this all works.

Case in point: the average trader or investor predicts by extrapolation. That is, they assume that the recent past will continue into the future. This is not necessarily so. It is not derived from logic. It has no real basis except in the way that person perceives the world around him. This is the Achilles heel of trend following. And, technical analysis. At some point it works, until it doesn’t. However, the mistake many make is to keep applying trend following systems and other methods thinking that those things represent reality. It just ain’t so. 

I believe that the key to clarity in this environment, is to resist overweighting recent history, which has been bad, in estimating the future. Reversion to the mean is not a concept the average person embraces naturally. However, it is a law we must all give creedence to if we wish to be successful at trading markets.

Another pitfall for traders and investors is their lack of emotional control. Take fear for example. most people have a pure dislike for losing money, which borders on terror in some instances. There’s nothing wrong with that, if you’re a old, wimpy or an accountant. But I gather that since you’ve ventured out from the herd and landed smack dab at IBC, you ‘re somewhat of a character, all mavericky and such. You cowboy up. You embrace risk. You don’t let your emotions paint the picture of the future. You control your fears. Bravo! 

Truth be known, we all love winning stocks more than we probably should, and we all hate losing stocks more than we should, treating them like some spawn of the bubonic plague. The problem is, if we are of that ilk, we don’t notice the changing landscape as readily. We don’t notice when situations improve and yesterday’s failures morph into tomorrow’s comebacks and successes. We fail to take advantage of things like BAC going from a low of $3.00 to $4.93 in three days (a 64% return, or 7,786% annualized).

What I am trying to say, is that the future is uncertain. All options must be considered in the analysis. We cannot rule out that just because the market has lost over 58% or so from it’s peak, it will continue to do so. Or, that a 379 point rally will start a new trend.

What we do is one of the most difficult, challenging and fascinating endeavors in the world of finance. I am amazed at the depth of knowledge and dedication from many of you that post on the IBC blog.

No doubt, I have become better at what I do, thanks in part to your generosity in sharing your knowledge here.

Keep it real, one day at a time.

Have a good night.

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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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I’ve been busier than a one-legged sailor at an ass-kicking contest. That’s right, I’ve abandoned my 100% cash position today to roll the dice, while smiling prolifically.

So far today, I’ve bought C, BAC, MSFT, AFAM, CY, BXP, POT, MOS, TGT, PBR, NOV, LVS, IGT…and I haven’t stopped yet. Everything is up quite nicely, in a coin-banking sort of way.

So what if the economy is in the tank, this is fun!

Keep buying, boys!

Ribeyes tonight!

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XLF, XLE, XLB, XLI, XLY—-or look for names in those spaces.

Bears getting rolled and shorts getting squeezed.

That is all.

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The market is vastly oversold. I’m showing that only 1%, of the over 3,800 stocks on my database, are still on buy signals.

The NYSE new highs/new lows index is sitting at 2%. The lowest recording since last October.

This might be a chance for the bulls to do some “quantitative easing” (that’s Fedspeak for printing money, in case you weren’t conversant).

We shall see.

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Globalization is nearing death and is going away. Or, at the very least, it’s severely maimed and slipping into a coma. Get used to the idea.

What we are witnessing now are the beginning stages of a global depression that is the consequence of a 25 year credit bubble and  a global expansion that went bust. This wonderful bubble has been responsible for global economic growth and rising incomes all over the planet, especially in the developing countries, much to the chagrin of the American middle class, who got the “homo-hammer of outsourcing”.

Additonally, I for one, think it’s rather assinine that our government is moving more toward socialism, when socialism has proven to be a total failure, viz. the Soviet Union and Comrade Gorbachev. (Yeah, “take that wall down”—-remember?) I guess the folks in the White House are either ignorant, or have a rather short memory of economic and geopolitical history—or both. It should be of great concern that their ignorance on this matter is casting a dark cloud on our fate in history.

Quick history lesson. The two biggest factors that contributed to global economic growth were…..

1. the fall of socialism (USSR and Eastern Europe)

2. the Internet.

Lower interest rates didn’t hurt the cause either.

The fall of socialism opened up more markets and gave capitalism access to a very large pool of low-cost labor in China and the Eastern bloc countries in Europe. The internet allowed firms to hire intellectual expertise and brainpower anywhere on the planet, and allowed information to flow freely and rapidly. Local markets became, in effect, de-localized.

So, what do “they” do now? They will reverse an expansionary trend, and shift things over to a contractionary trend via the “miracle” of socialism. Hey, asshats, let’s intervene into the capital markets with the greatest “stimulus” in the history of mankind. Let’s enact legislation that will serve to drive social policy for the next decade, rather than support the entrpreneurial community responsible for economic growth and job creation. Instead of promoting ideas and fund ventures which only serve to help the rich get richer, let’s pour trillions of dollars into government “projects” that will put people back to work building bridges and filling potholes. When those projects are done, we’ll simply come up with something else for people to do. Problem solved. Hey, slow or no growth is the great equalizer. It’s good for everybody, if economic equality is what you’re after. Thanks, Comrade Stalin!

All this sets us up for a potential rising tide of de-globalization. That is, a move back toward nationalism and protectionist policies—the putting up of trade barriers and measures to protect local economies, as said economies tank.

I believe we might be heading down that path, similar to the early 1930s when a severe recession was turned into a depression by “deglobalization”. Smoot-Hawley passage enacted tariffs on over 100 products imported to the U.S., all in the name of protecting the American worker and job creation stateside. This created a reactionary backlash from other countries that contributed to our Great Depression.

Now our government wants to repatriate capital, bring jobs back home to the U.S., free ourselves from foreign oil (ask least in speech), and spend money on U.S. infrastructure. These are the seeds of the protectionist mindset—-and as economies all over the planet implode, the seeds will germinate into a new era of deglobalization and slower or even negative growth.

Our stock market, as usual, is correctly forecasting this egregious page in history.

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