Seriously, I’ve been a hardcore cheerleader for this rally. I’ve made every excuse, provided the internets with a plethora of reasons why stocks should trade higher; but this is just getting ridiculous.
Originally, I aimed for 10,500, then set my goals higher for 11,000. During the sharp sell off in January, I changed my mind on 11,000 and vowed to get the fuck out of stocks, once I was made whole again. Well, as you know, for the most part, that is exactly what I have done. While it may bore many of you to read my daily diatribes of “how to do the Hugh Hendry and why,” via [[TLT]] , you must remember, I conduct myself like a gentleman at all times and have perfected my trade of proper asset management, throughout the years, unlike many of you dart throwing coked out gorillas, running a hedge. I simply spit on you, from a range of 40-500 yards out.
Back to my point.
I look at stocks, trading with absurd valuations, like Baidu.com, Inc. (ADR) [[BIDU]] , Wynn Resorts, Limited [[WYNN]] , Starwood Hotels & Resorts Worldwide, Inc [[HOT]] , The Macerich Company [[MAC]] , Las Vegas Sands Corp. [[LVS]] , Amazon.com, Inc. [[AMZN]] and salesforce.com, inc. [[CRM]] and say to myself “this is going to be ugly when it ends.” I cannot say for certain when this Fed induced rally will end. However, rest assured, when it does end you will be swimming, mind you, in large capital losses, unless of course you are wise enough to plan ahead. The valuations that are now being applied to stocks, one year removed from the greatest economic collapse in generations, is simply unsustainable.
There are people who believe that equities can keep trading up, providing the dollar is debased. Over the short term, sure, that makes sense. But is that a logical trade long term? I mean, really, are you fucking nuts?
These days, everything is interconnected. A Japanese bank getting fucked in California mortgages can throw mashed potatoes on this rally and precipitate a global crisis, in one week flat. You cannot have a poor economy, weak dollar, and expect higher stocks indefinitely, based upon the idea that “since it’s priced in dollars it must go up.” WRONG. The chickens must come home to roost.
Take a look at what occurred during the credit crisis. Asset managers were stuck in funnels, dying to get out of stocks, as margin calls exasperated their cash calls. The only true flight to safety was in U.S. Treasuries, since it is backed by the full faith and credit of the United States. After all, when the shit hits the fan, where would you rather have your $200 million, in Treasuries or Freeport-McMoRan Copper & Gold Inc. [[FCX]] ?
Look, there is so much money invested in the U.S. markets, it would take some sort of parabolic shift to jar the dollar to startling lows. Money will simply follow the path it has always traveled, in and out of stocks and bonds. There will be no Exodus from the dollar into euros. If anything, euros will flood into the United States, in an attempt to escape their hopeless mess.
In recent years, gold has been plugged into nearly all asset management models. And, as a result, there is decent support for the yellow metal. However, once again, during the crisis of 2008, gold proved it was not a safe haven.
In short, enjoy the rally while it lasts; because when it ends, you are going to be shining my shoes.If you enjoy the content at iBankCoin, please follow us on Twitter