Don’t you just hate it when a “thing” latches onto your thinking and it will not let go? As you all know, my “thing” is the doomsayers. I want to let go of my seeming obsession with their nonsense, but every day, both old and new doomsayers get in my face. They are like ants on an open jar of honey — they are swarming.
- Stocks are up big to start 2013 but Marc Faber, Editor & Publisher of the Gloom, Boom & Doom Report, says it ends in tears. “Either the market is going to correct more meaningfully now or we have a shallow correction and a continuously rising market until July or August,” Faber told me via phone from Thailand. If stocks don’t pullback soon, he says we risk a repeat of 1987 when stocks rallied 40% into summer only to collapse 41% in 2 months.
At least when the market is bad, the bulls have a hard time swarming. Sure, they poke their heads out now and then to speak their minds, but to fly in the face, say, of the great collapse in 2008 and early 2009, is just not their style. For heaven’s sake, man, Dr. Roubini is still peddling his doom after almost five years of missing his doomsday mark.
I am not against prudence, even caution, in a market that has run up so far so fast in 2013, but to suggest 1987 is coming all over again. I just need some evidence that suggests a collapse, rather than a normal correction, is coming. I need evidence other than too many buyers in the market and the market is overvalued. BTW, by normal correction, I mean 10%, possibly a bit more, certainly not 40%, as was the case in 1987.
Anything is possible, but to sit this one out because of the wild-eyed wanderers shouting from the hilltops is missed opportunity at least. Consider the words below if you are one who is afraid.
- Staying half invested at least wards off the lunacy of timing and Doomsday scenarios. Leave the timing to people feigning omniscience on television.
Or, if you are not one who fears collapse, then consider the words below as words of reason and calm in a market environment that is a bit unsteady and act accordingly.
- That’s not to say a pullback is imminent. It’s probably going to materialize sooner than later, but until the bulls actually decide to yield (or until the bears decide to take charge with some authority), stocks may well stay in the current limbo while traders get their bearings.
The market is up and down in a fairly tight range. In the last five days, the VIX has dropped from around 14.5 to 12.9, and for four of those days, the VIX is almost flat. Volume is not great, but it is steady. It seems no one is buying what the peddlers of doom are selling, at least not yet. That time might come, but, at this moment, few are running away; the opposite is true.
This tight range is indicative of uncertainty, yes, but it is also suggests consolidation is happening. The longer this uncertainty phase goes on, the more opportunity big institutions, such as state pension funds, have to inch their way cautiously into the market. The draw right now is strong and, no matter the doom and gloom, the longer the DIJA hangs around 14,000 and the longer the S&P 500 inches past 1500, the more big money slips into the market forming a base, a base of money that does not move easily or quickly. A pullback or a correction will simply add more money more quickly to the forming base and it will make it harder for a collapse to happen.
In the meantime, if the US economy continues plodding along and the US politicos can manage a bipartisan resolution of the coming arguments, more of the almost $3 trillion of stashed corporate money will find its way back into the economy. This will boost hiring, which will boost consumer confidence, which will boost spending both on the business and consumer side. All of this together could mean the opposite of a total collapse; it could mean an historic bull run that could last of some time. Does anyone want to miss that?
- Europe’s leaders agreed last Friday to push for a free-trade pact with the United States, according to a draft joint statement, putting the onus on the White House to respond to a proposal that would encompass half the world’s economic output. Major exporters Germany and Britain appear to have won support from the rest of the European Union at a summit in Brussels to reach a deal with Washington that many leaders hope will help Europe pull out of its banking and debt crises
Think about it … I certainly am …
Trade in the day; Invest in your life …
