First, let me be clear – the selloff today is not pleasant for me. Two days in a row I have watched my trades flounder. That is irritating, but the part that is more annoying is I get the feeling this selloff is not quite over, so I can’t pull the trigger on buying. The only thing that keeps my frustration in line is my knowing the big-money bulls are doing the same thing – waiting it out.
Now, if you are looking for some sane reason for the insane sell off, stop looking. Fundamentally, there is no rational reason for what is happening. The market is going down because selling has become a mania – traders are running scared and the herd is forming up behind them. Have you ever seen a buffalo stampede? After yesterday’s selloff, one writer I follow put it this way.
- Oh, and one last thought about today’s selloff ….while the media deemed a weak manufacturing report from China and disappointing earnings reports as the reason, I’m calling BS on the cause/effect relationship. Today’s dip played out because traders – who have been nervous for a while – finally lost their will to hang onto stocks today.
He is right. The breathless media is lamely attempting to find an explanation for the market catching up to itself. Again, wait it out. This too shall pass.
- A global flight from emerging market assets gathered pace on Friday, sending the Turkish lira to a record low and setting global shares on course for their worst week this year. European shares fell, especially in firms exposed to emerging markets, and a sell-off on Wall Street was poised to extend into a second day as investors worried about the impact of slower growth in China, U.S. monetary policy and political problems in Turkey, Argentina and Ukraine.
Really? The selloff is because investors are worried about political problems in three countries that combined have little if any impact on the world economy, much less world markets. And how many times have we seen the well-worn phrase “investors worried about the impact of slower growth in China”? Seriously?
I repeat, nothing has fundamentally changed in the world, other than Iran might actually live up to its agreement about its nuclear program, which means more oil on the market. As well despite the sound of despair in the air about earnings, don’t fret about those either. In fact, so far, earnings are coming in just about normal over all. Some 63% have met or exceeded expectations.
Look down the road a bit, say six months, which is what big-money investors do. What do you see? Is there a big-bank collapse in the offing? Is the global housing market about to implode? Is a nasty recession looming? Not one of the above is likely, given that we just went through all three in the last five years. Aside from that, there is not a single sign pointing to any of them as a possibility. Sure, we will have some problems here and there, such as China having uneven growth, but more than likely, the world will be a better place in six months, economically speaking.
In fact, going back to Iran and its oil for a moment, in six months, if Iran lives up to its recent agreement, the world will have millions and millions more barrels of oil floating about. Given that counties across the globe are now using less oil and global oil inventories are far from depleted, it is likely that in six months, the price of oil will be down considerably.
Consider the following in conjunction with the above.
- Countries across the world have been quietly signing deals in recent months to import natural gas from the United States, revealing a growing appetite for the fuel overseas as domestic output soars.
Yup, sit tight. Let the fear play out and when you think we are close to hitting the bottom, buy all you can buy because the market will be going back up sooner rather than later.
Trade in the day; Invest in your life …
