WASHINGTON, June 24, 2013 — Last week was a horrendous week in both the stock and bond markets, as all the averages and most bonds were mercilessly pummeled beyond recognition. The ongoing Nightmare on Wall Street continues this morning, with the Dow having been down some 250 points in the early going.
The lesson here is that last Friday’s brief fake out respite was only a quadruple witching day timeout. Today, the massive selling has resumed in force, proving that if you get caught napping in this market, Freddy Krueger will make short work of you and your portfolio for sure. Wall Street’s 2013 dream world has been drenched with investor blood since an inauspicious May drew to a close.
Eternally sunny pundits (except for gold perma-buffoon Peter Schiff) are brushing all this off with buy recommendations, but it’s all for show. They’re either trying to sell their wobbly long positions to mom and pop or they’re short and lying through their teeth about the stocks they’re touting.
The only certifiably sane financial journalist on TV these days is the Tea Party’s accidental founder Rick Santelli, who’s had the Washington-New York shell game pegged correctly since at least 2008. Most of the rest of TV’s talking financial heads have no clue what they’re talking about.
The Fed’s mild threat to pull away the QE punch bowl drop by drop rather than wholesale was just the excuse the market needed to relieve this spring’s massively overbought condition, right in time for a late Sell In May party. As the selling accelerated, investors, both individual and institutional, having gone slaphappy with margin, have been hit so fast with margin calls over the last couple of weeks that they probably don’t even know yet what their brokers have sold them out of.
The result is peaking in a mass forced selling panic that’s had the effect of a Daisy Cutter dropped directly on the NYSE. In point of fact, we’re probably very close now to a massive relief rally, which, though short lived, will likely engender just enough investor optimism to make a second Daisy Cutter drop a foregone conclusion.
Small wonder that small investors remain wary of this awful, wildly unpredictable market. Everyone is lying to them and setting them up for their next big haircut. It’s the best argument yet for terminating crony capitalism and trying something else.
While we’re buying Schwab ETFs in tiny five share increments here, focusing on the broad market (SCHB) and on growth stocks (SCHG), and while we hold a position in First Energy (FE) that’s killing us, we’re mostly cash and bonds now—bonds we bought way below par in March 2009, mature in one to three years from now, and will make us a healthy profit at par anyway. We’ve been hurt in this downdraft because we weren’t quite in enough cash. But we’re still well ahead for the year and have already booked massive dividends from the REITs we’ve been forced to exit recently.
In other words, we’re a bit irritated here, but waiting for things to sort themselves out. As a result, once again, we have zero recommendations for you today except to stay out of the way and judiciously raise cash. If you miss the upcoming oversold rally, don’t worry. While it’s likely to be fierce, it’s also likely to be brief. Wall Street’s masses have gone negative again, so it’s best to stay out of their way unless you’re a highly skilled day trader, which the Maven is not.
We plan to stay awake today. We’ll be back tomorrow if we’re still alive.
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.
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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