If I sound like I’m a little frustrated you’re right. No, I am not frustrated with the stock market; we have actually made some good money this year. Like many professional investors, I keep long and short positions at all times.
I have heard more BS about the soft landing, Goldilocks, and the end of the Real Estate recession than I can take. Not to anyone’s surprise, I don’t believe a word of it.
The old saying for years has been “don’t fight the fed”. Will the new mantra now be “Don’t fight the Plunge Protection Team?”
If you closely follow this blog, you know that we, as well as others, have expressed the possibility of the PPT being involved in this market-See Articles Below.
Eventually, if not now, investors will begin to take any warning or potential dangers in the markets with a grain of salt. Using the old teenage adage “whatever” will soon come into play as investors get increasingly bullish.
The market continues to rally even after retail sales fell for the second straight month. The fly in the ointment is that retail sales continued to slide as gasoline prices declined. This leads us to believe the consumer is beginning to pullback their horns. In addition, grocery store sales were up which means more consumers are eating at home rather than dining out.
As far as housing related sales are concerned, purchases for building materials (IE-Home Depot), as well as items such as furniture and appliances were all down. On the surface, it looks as if the housing squeeze is beginning to affect the consumer.
Just this morning, I spoke with an investor who had just bought the Pro Shares Ultra-Short MidCap 400 (MZZ) fund. I asked him what he thought about the Pro Shares Ultra-Short Dow 30 (DXD) fund, and he said he was afraid to short the Dow. I looked at this opinion through the eyes of a contrarian and thought his feelings were probably the universal opinion among the majority of investors.
It’s easy to ignore bad news when the market continues to climb. Last week, we heard that China was going to reduce its holdings of dollar denominated assets to diversify away from a shrinking dollar. In an attempt to dispel this concern, news quickly appeared that other countries (like Brazil) were going to take up the slack of any sales by purchasing dollar denominated assets. Please forgive me, but I don’t think that countries like Brazil have the same economic clout as China. One of the main reasons we remain hedged is because countries like China could wreak havoc with one flip of the switch.
This morning, Bloomberg reported that former Treasury secretary Robert Rubin and former Federal Reserve Chairman Paul Volcker said that “foreign investors probably won't keep increasing dollar holdings, raising the risk of a slump in the currency.”
While all of the bullish hype and discussions continue, I have to ask a simple question. What do they want to discuss now, our favorite color?
