WASHINGTON, October 25, 2012 – The market looked like it wanted to rally yesterday, but Na-a-a-ah! The bears tackled the averages again, and this week’s pre-election bloodbath continued in a perfect lead-in for Halloween. Wall Street futures are up again smartly this morning, as they were yesterday at this time (8:20 a.m. EDT). Jobless claims were reported down (“unexpectedly?”) But as we learned from yesterday’s trading action, all that don’t mean nuthin’. Freddie Krueger is about to invade your bullish dreams.
We escaped our Apple calls by the proverbial skin of our teeth yesterday, putting our portrolios’ last two days’ action on a more or less even keel, although our bonds ended the day unhappily as well which is weird. Aaaaargh!! When stocks go down bonds usually go up, which is why we balance our portfolios with at least 30% in debt instruments. But that balance didn’t work very well yesterday either.
We hung on to gold even as it continues to sink, no doubt due to the dollar’s unusual strength over the last few trading days. Another general rule of thumb: when the dollar goes up these days, stocks go down and so does gold. Or not.
As we’ve been broadly hinting here, trading in the final quarter of 2012 is likely to be almost unfathomable. HFTs are ruining the predictive powers of even the most sophisticated charting systems, hedgies and momentum traders (those who are left) are making mincemeat out of fundamental analysis (PE, earnings, etc.), and our sclerotic governmental institutions are doing their best to destroy what’s left of our system by the kind of inaction that enriches them and their cronies while impoverishing us.
For which reason we have to take seriously the following observations we’ve recently come across at Monty Pelerin’s World:
“The corrosive nature of politics and government has destroyed the economy and the moral fiber of citizens. These issues are not insurmountable, but they are very close to being so. Their ramifications are potentially existential in nature….
“… the average length of life, the very time span or cycle of a nation has been proven in history to be approximately 250 years. Since the USA was born in 1776 this says we have about 14 years of life remaining for America. The way things are going we don’t doubt it.
“At this point only the ignorant are not scared. Most businesses and investors know that things are awry. They may not understand the existential nature of the problem, but they are unwilling to take risks. That is why our economy languishes and every government intervention makes the problem worse rather than better.”
But the essence of what’s stated above is, the Maven thinks, largely on target. We’re not convinced the U.S. is in danger of imminent collapse. But what we’ve regarded as our way of life most certainly is. The interesting part is that more and more people—even those allegedly lacking in what passes for education these days—are waking up to this point. Political, educational, and business leadership in the U.S. needs to wake up from its adolescent dream and get a grip before the public is forced to take matters into its own hands.
And it’s this kind of fear the market faces right now. Investors are “de-committing” as the year draws to a close. No one knows what will happen next, which makes long term investing and long term business commitments impossible. This is no way to live, but presumably—ballot-stuffing antics aside—we get to decide on November 6. (Keep your eyes on Philadelphia, Cleveland, Madison WI, and Florida for Third World-style antics.)
In the meantime, this trendless market is day to day. We’re continuing to reduce our positions, even as we do keep our hand in a few utilities and MLPs, while we look to climb back in to at least a few REITs, all for income with little hope for decently-sized capital gains which the machines tend to snatch away before you can book them.
Airlines have been atypically strong lately, probably due to the current drop in fuel prices—long overdue. Healthcare is okay, particularly the big pharmas. A certain portion of gold is a must-have, but even this has not been reliable lately. But that’s about it, and cash is once again king.
We’re natural optimists, believe it or not. But when reality bites like Dracula, you have to wipe off that serene smile, pack a crucifix and some garlic, and dig in.
Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate. He continues to own a position in IAU but dumped the Apple (AAPL) calls at roughly breakeven yesterday due to unmanageable volatility.
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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