WASHINGTON, August 21, 2012 – It’s 11 a.m. EDT as we write this and the market is floating up again on—surprise—incredibly light volume. Reason listed on most financial sites: some announcement of some kind of stimulus activities will shortly emanate from either the EU, the US, or both. Which, of course, will put more air into the price of stocks even as Western economies continue to stagnate, roll over, and add debt.
It seems as if government, financial heads, and financial journalists have all drunk the Kool-Aid here. Or, perhaps more appropriately, they appear to have OD’s on the controlled substance of choice, “hopium,” as one unknown wit once put it before the term went viral. The Maven doesn’t know about you, but in Maven Land, we learned a long time ago never to “hope” that things will turn out OK. They never do. At least not on their own, which is apparently what the numbers guys are, well, hoping for these days. Never works. Trust us.
That said, the market continues to levitate, notwithstanding our constant stream of negative comments here. We’ve been jumping in just a bit to take advantage of this silly pop, but only selectively, adding a little energy and refinery power here, a little gold (via the IAU ETF) there. But these are likely quick and (dare we hope?) profitable trades for us. There’s no commitment here.
Indeed, if somebody in power actually follows through on the latest set of optimistic rumors, the current ghost rally is likely to continue, at least until the Labor Day holiday. (Which will surely be quite a welcome respite for those who actually ARE laboring for W-2 income these days.) But when traders return from the Hamptons en masse in a couple of weeks, we suspect that a big chunk of selling will hit the tape.
The market actually faces an existential threat this fall, as it becomes an increasing certainty that something very nasty will happen in the Middle East, probably involving Iran. That’s the reason, in the main, why petrol prices are skyrocketing once again at a pump near you in case you haven’t noticed. Any action in that part of the world is likely to have extraordinarily negative consequences everywhere else, as oil supplies may get cut off indefinitely, mass destruction may occur around the world, and dozens of unidentified Al Qaeda and Iranian terrorist cells get activated to cause major damage to Western economies.
That’s why those who are really in the know have been quietly selling, selling, selling since March and why it’s best to take great care here when dabbling in the market. Western politicians are basically inert in all this, and, in case you never noticed, remaining inert in the face of grave threats is generally not a successful policy.
All this may seem far away to the average investor, but it won’t be if someone makes a foolish move sometime between now and election day 2012. Since the likelihood of such a move has increased in this environment, it’s best to scalp a few short-term profits if you have the stomach for it, and then get cash-y as Labor Day approaches.
Yep, if we do so, we might miss a really big rally when Europe really, really, REALLY solves their problems. But a bet against this is probably a better bet, at least at this point. Going Galt with whatever money you have left is a far better idea than simply giving it away to the same criminals who stole it from you the last time around.
Jeez. We long for those thrilling days of yesteryear during a time like this, and sometimes, we even hope they’ll return. But then we sober up. Because that’s resorting to a hopium high again, isn’t it?
Relax and enjoy the day. It’s a better alternative at this point than watching the HFTs manipulate a thin market higher.
BTW, in closing, here’s a link to a pretty decent Jim Cramer rant on the top of Facebook’s continuing stock trading stupidity. The stock continues to sink as insiders continue to massively unload as the lockup period on their stock expires. This whole issue was nothing more than a massive and apparently legal fraud perpetrated on the investing public by the usual taxpayer-supported suspects. No one will ever be prosecuted for this. And pundits wonder why the little guy has left the investing scene.
Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate.
Positions mentioned above describe this author’s own investment decisions and should not be construed as either buy or sell recommendations. The current market is highly treacherous and all investors travel at their own risk, so caution should be exercised at all times.
Illustrations, charts, commentary, and analysis are only the author’s view of current or historical market activity and don’t constitute a recommendation to buy or sell any security or contract. Views, indications, and analysis aren’t necessarily predictive of any future market or government action. Rather they indicate the author’s opinion as to a range of possibilities that may occur going forward.
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