For those who follow me, you know I’m not a fan of most anyone who gives their bull or bear story on CNBC. Most of these individuals have a bias which means you are likely only receiving partial truths, if any. These individuals represent large firms with a different investing style than an individual investor can mimic with limited capital who can not always average down and down again. I have a select few I follow. This does not mean they are always right, nobody is in this industry. However, they do usually make compelling arguments, so even when they are wrong, you learned something from it. It appears I have someone else I am looking to start following for his market perspective. Longtime friend of the site @asVitale on twitter recommended this video and I’m glad he did.
4 Minute Video
Bill Strazzullo is not a doom and gloom preacher from what I can see, though it appears some believe he is from what I’ve read. From what I can see, he is simply stating we need more pain before we can resume the bullish pleasure. This is something I have been expecting myself, but I don’t make predictions on where we actually fall to. No reason to make predictions as such as most are wrong, but I do believe we have more downside to go and as discussed in my trade of the week, we must be prepared for it. The key thing Bill says is that we need to expect “rotation.” This is a very important point to understand. Markets do not typically go straight up or down (unless it is QE being pumped in as we’ve learned over the past couple years). They have volatile bounces and swings in all directions. This is why we move to cash rather than try to predict every move as the market will act like an irrational child throwing temper tantrums. Rotating means we may get some sectors performing well, such as gold obviously performing well lately while most all other sectors have been just plain ugly. We may find new leadership in the coming days or weeks, but the market may still continue to downtrend, so stay vigilant is the point.
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I’ve seen some individuals claim most bear markets tend to last about two months on average from start to finish. That means we have a few more weeks to go still. I don’t fully subscribe to statistics like that, I view it like throwing dice, the previous roll has no bearing on the next roll. Even with that being said, I still take that information in and process it while I observe the action in front of me. At some point in time, the same news will become desensitized, so unless we have some new negative headlines coming up, I think we should be finding ground in the near future. The one concern in the back of my mind for September is that last I checked, the Israeli border issues are supposed to be back in the spotlight as the U.N. is supposed to vote on it’s borders. Wars or the thought of war is never good for the markets and I expect that may put additional stress on our markets if a peaceful solution is not reached. Let’s be frank, how often does a peaceful solution happen these days? As I keep that in the back of my mind as August comes to an end, I continue to think holding extra cash rather than rushing to deploy it may be the best strategy for the coming weeks. The trump card is if Bernanke starts QE3 soon, but I don’t think he will anytime soon. I do think he will initiate it though, I just don’t see how he can justify it right now.
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As always, do your own homework to see if you agree. Good luck out there.
Mike
No positions mentioned
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