In the aftermath of hurricane Katrina, it is becoming more clear that the Fed will put off any further rate hikes until November. The markets ho-hum attitude of the damages left by Katrina are somewhat characteristic of a market that loves to suck investors in before chewing them up and spitting them out.
I am happy to see the market rally despite the horrible events of last week. I am always excited when the markets follow the patterns that we attempt to lay out.
I am going to use this rally to sell some of our Consumer Discretionary positions. First on the list is the Walt Disney Company (DIS). I am of the opinion that consumers will begin to slow their discretionary spending on travel and tourism in 2006 if not now. Given the higher costs of fuel, and the possibility of shortages, going to the theme parks seems to be an unnecessary gamble. Corporations will begin to tighten their advertising budgets as consumer spending begins to contract.
Over the Labor Day weekend, almost every service station was out of gas. Very few cars were on the road, and the only people driving around were out looking for gas.
The second sell on my list is Pfizer (PFE). Given the ruling against Merck (MRK), its seems that PFE will also be in the crosshairs of attorneys looking to make a fast buck. I am well aware that many of the awards against MRK and PFE will be reduced, but these pharma giants will have to contend with thousands of potential suits.
The month of September is usually a bad month for the markets. I would like to wait until late October before initiating any individual short positions. Particularly interesting is the Retail Sector. For now, I am comfortable with our hedge position in the Rydex Tempest 500 Fund (RYTPX). The best way to build a hedge in this fund is to dollar cost average in on days like today.
As a side note, I am sickened to see the suffering and pain that the people along the Gulf Coast are enduring. No one should have to go through that. I am equally sickened by the posturing among politicians as they attempt to sidestep and deflect blame.
The Bush Administration is unjustly being criticized for a lack of response that was clearly a lack of organization and preparedness by the City of New Orleans, the Mayor, and the Governor of Louisiana. FEMA, once on the scene was responsible for many missteps also, but unless one has been through a major hurricane like Katrina or Ivan, you'll never understand what being shut out of the civilized world is like.
