Well, we had our little sell-off, now what?
As I noted yesterday, my concerns run a little deeper than a little profit-taking off a week-long BS, low-volume rally. On the whole, it’s just a little pullback that makes for healthy consolidation if we can get back on track but, as I noted yesterday – the tracks ahead do not look all that safe either. As David Fry notes:
The market is also rumor prone with volume still light. Most rumors Wednesday revolved around the eurozone where euro flight to offshore havens was much discussed. Further more investors are beginning to recognize the previous eurozone fix wasn’t much of a fix at all. Rather it just bought some time. The focus remains on Italy where Italian debt needs to be sold, not just this week, but repeatedly. Investors are worried about collateral being put up for loans. Pay attention to this is the watchword.
We were thrilled to take the bearish money and run on yesterday’s little dip. We’re still speculatively short into the long weekend but essentially cashed out of short-term positions into the Holiday with our virtual White Christmas Portfolio now officially close, miles ahead of our original goal.
Cash is an excellent position to be in as we wait for clarity, both from EU bond auctions (Italy was so-so this morning but Hungary’s was so bad they cancelled it!) as well as US Corporate Earnings, which are far from a sure thing next month. In fact, this morning we noted in Member Chat that credit-ratings firms are growing less optimistic about U.S. corporate borrowers, downgrading more companies as they forecast defaults will rise.
A two-year rise in U.S. companies’ creditworthiness may be drawing to a close as Europe’s sovereign-debt crisis roils capital markets around the world, reducing the ability of riskier borrowers to raise money from investors to finance their operations. Moody’s cut more grades than it raised in the second half of the year as yields on speculative-grade debt reached a two-year high in October.
Like many misguided Nations, our Corporate Masters have met the Great Recession by pursuing austerity measures that have done a great job of improving their current bottom line but have actually made things worse by worsening the conditions for the American Workforce – leaving the companies without any long-term growth prospects in a stagnant economy.
On the complete opposite end of the…
