First thing on this Monday morning of this Halloween week, the market goes all “fraidy cat.” It opened as if it were watching the latest hit movie, Nightmare on Wall St, playing in theatres all over the place as of late. The plot goes like this. The bulls fall asleep and the horrible bears take over the dream world just to make life miserable for the bulls.
Eventually, the bulls wake up, casting out the evil bears. But here is the scary part. Sometimes, the bulls just think they are awake, buy the heck out of the place only to find the bears lurking under the bed with their weapon of mass destruction – high-frequency trading. The bulls see the bears, scream and shriek wildly, and then run out the door. The bears chase them, all the while selling the heck out of the place, which causes panic in the streets. It makes me shudder just to think about it.
Happy Halloween week, folks. I suspect we will all get to see “the movie” play again this week, given the market’s negative opening today sudden reversal, and now pushing hard back into the red. The seeds of doubt are in the air again.
- Global equity markets slipped on Monday, hit by weak German business sentiment
- U.S. crude oil continued its months-long rout, trading at less than $80 a barrel, as signs of rising global supply threatened deeper price losses.
- Disappointing data that showed the pace of growth in the U.S. services sector slowed in October to a six-month low also sapped buying sentiment.
We should add to the above list the weekend scare –25 European banks failed stress tests. The headline appeared wraith-like everywhere I looked this weekend. Yet …
- On the upside, Europe’s bank stress tests beat market expectations, with only one in five of Europe’s top lenders failing at the end of last year, and many have since repaired their finances.
The sub text to the recent hit movie, Nightmare on Wall St. (another stockbuster produced by the breathless media) is that investors will see the current bull market (now some 68 month in the making) for what it is – a zombie, one of the walking dead supported only by the evil force, the Fed. Soon, as in really soon (as in 2011, no 2012, sorry, 2013, okay, I meant now, 2014. Okay, now I really mean it –2015!), the investors will see this and the possessed market will fall.
- For almost six years, one of the most powerful bull markets on record has coexisted with the weakest economic recovery since World War II.
Wild scream in the background. He turns and sees the market has reversed itself again. This time, it is headed for the green. He smiles, but then he quickly remembers what evil he is up against. Not without fear, but steady with determination, he steels himself to withstand what he knows is coming – another up soon to be followed by another down.
- GDP probably rose 3 percent in the third quarter and will hold around that level for another two years, according to the median estimates from more than 80 economists surveyed by Bloomberg.
GDP rising three percent is not enough to sustain the levels in the market, the script reads, and when the Fed removes the lifeline this next year …
- With S&P 500 12-month earnings doubling to $103.21 a share since the end of 2009, the index trades at a price-earnings ratio of 19, compared with its average of 25 since 1990, data compiled by Bloomberg and S&P Dow Jones Indices show.
We have all seen the movie so many times, it is becoming stale, yet, somehow, it manages to keep playing and folks keep going. Now, that is the power of marketing.
Trade in the day; invest in your life …
