WASHINGTON, November 19, 2012 – Markets are looking to have a big upmove this morning as “optimism grows over a bipartisan solution to the fiscal cliff,” according to any number of financial news sources. That may be true. But it will be true for about half and hour, maybe, as this optimism, like all other optimism about “bipartisan solutions” to our fiscal problems will soon be dissipated.
Fact: The political class on both sides of the aisle is terminally corrupt. The Democrats are brazenly corrupt, while the Republicans are wimpily corrupt, fearing to state their true positions (if they have any), knowing that if they do, they’ll be smeared and slandered out of office during the next batch of elections.
It’s for this reason that any “bipartisan” solution to the fiscal cliff is simply another name for complete victory by America’s socialist party. Which means in the end that the cliff actually gets steeper rather than disappearing.
That said, the happy talk is all over the place this morning, so, as we’ve mentioned the markets will open nicely up, making mincemeat of our leveraged short positions. That will follow on Friday’s somewhat surprising late rally, caused at least in part by the usual weirdness that follows options expiration—which, of course, also happened on Friday. (UPDATE: At 9:50 a.m. EST this morning, markets are indeed up, with the DJI soaring 143. We’ll see if this holds.)
The market, actually, is likely to be totally unpredictable this week. Trading will get lighter and lighter as we approach Turkey Day, HFTs will be in complete control, and things will gyrate accordingly. Congress will split for the holidays, meaning that little news will come out of DC—praise God. So the markets will trade on air and rumors and maybe on an Israeli invasion of Gaza and assorted unpredictable fallout over in that never-ending cauldron of violence known as the Middle East.
We’ll maintain our short as long as we don’t go radically into the red because we think the market will re-commence its downward trajectory sooner rather than later. We have about as much faith in the ability of the Government to arrive at a meaningful plan for ending Great Depression II as we do in the Eurocrats solving Europe’s debt problems before the peasants with pitchforks get fed up and do a Mussolini finale on them all.
We are probably privileged—or doomed—to witness the death throes of late-stage capitalism over the next few years, and the longer the political and media elites prolong this bitter end, the worse and more violent it’s likely to be. The end product almost certainly won’t in any way, shape, or form resemble the socialists’ dream utopia simply because that has never worked anywhere either, so what comes next is anybody’s guess.
In the meantime, we can still make money here and there as investors inhale, inject, or otherwise ingest larger and larger doses of that new miracle element known as Hopium. But the supply of that artificial element is finite, and when it comes to an end, so will the longest-ever game of “kick the can” come to is ugly conclusion.
But as we’ve just indicated, there’s plenty of time to have fun in the meantime, so let’s. And shall we begin by bravely maintaining the shorts we’ve outlined below while maybe adding a couple of long bonds or long bond funds/ETFs to the portfolio, at least for a short-term trade? The long Fed bonds ETF (TLT) might be nice. The Maven’s fellow Virginia residents might want to consider the little known but very good Virginia muni bond ETF (BHV).
We will probably add a bit of gold now that the latest bear raid seems to be ending, via the easier to afford IAU ETF. (GLD, much pricier on a simple dollar cost, is the one institutions usually buy.) We might play with a touch of the silver ETF (SLV), although this extraordinarily volatile ETF has burned us in the past. And we might consider UCO, an oil ETF, simply as a hedge against surprises in the Middle East that happen on holidays or weekends when we can’t really trade the action.
Otherwise, cash—at least for now—is king and we continue to raise it by pulling, little by little, our remaining long positions. Even if we’re wrong and if the rally to end all rallies officially commences, we’ll have plenty of cash to buy into it once stocks decisively break downtrends. We don’t expect this to happen soon, so cash looks really good, and it might even look better in our mattresses.
Have a good one.
Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate. He is currently long IAU, SMN, QID, and FAZ, and continues to hold medium term corporate and municipal bonds.
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.
References to other reporters, analysts, pundits, or commentators are illustrative only and do not necessarily represent an endorsement of such individuals’ points of view. If specific investment vehicles are mentioned in any article under this column heading, the author will always fully disclose any active or contemplated investments in said vehicles.
Read more of Terry’s news and reviews at Curtain Up! in the Entertain Us neighborhood of the Washington Times Communities. For Terry’s investing and political insights, visit his Communities columns, The Prudent Man and Morning Market Maven, in Business.
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