Same Shit, Different Year I

Markets provide few surprises. A different Market Structure takes some acclimation time but market action seems to stay the same, year after year, cycle after cycle. Now that market participants seem to be used to 100% correlations or “the rising tide lifts or lowers all ships”, the calendar dictates much while fundamentals remain mostly ignored. Do you mean to tell me that slowing earnings are meaningful to prices now or over the past few weeks versus a few months ago when it obviously began?

How about technicals, the “voodoo” that fundamentalists scoff at but traders worship? Amazing how that long term uptrend remains intact, even if violated by a hair! And in many circumstances, when its obvious, its obviously not (thanks LR).

Without QE Infinity, the market would be significantly lower. But that policy is no longer as powerful as in the past as it is now well known and depended upon by markets. And in a world awash with liquidity, there is none when you need it. Just look at Apple. It fell EXACTLY 200 POINTS or 28.3% in a few weeks. It then rallied 67 points or .335% of that entire loss in less than two sessions. That, my friends, is Bear Market action from a technical perspective. Never mind that each point represents one billion dollars in market value. Its just Monopoly money now.

My thoughts about how the markets are being “used” remains the same as it has been over these past few years: It is simply a tool that buys confidence in our warped and distorted economic system. Forget about everything you know and just think about this: A rising stock market buys hope and confidence and covers a myriad of sins. A falling market destroys that confidence and exposes all sins. If you were in charge of the money, what would YOU do?

Though it is the Boolish Holiday Season, the risk of another market dislocation continues to be a real possibility, especially with the structure of illiquidity that our equity markets have become. But if you must put money to work, buy the highest quality dividend stocks that have recently sold off in anticipation of a dividend tax hike. No matter what the taxes are, capital will continue to circle back to dependable yield because there won’t be much virtually anywhere.

Have a safe and happy Thanksgiving!