Timing & trends
“Help, I’m alone. Where are my fellow newsletter writers: Stan Weinstein, Garfield Drew, Sir Harry Schultz, Marty Zweig, Chuck Almon, Bob Farrell? They all flew the coop while poor old Richard Russell is still carrying on. Maybe it’s because the stock market has become impossible or irrational. I think at any given time, the stock market seems increasingly difficult to figure out.”
“I think what’s needed is a lot of patience. Sooner or later the stock market will show its hand. At this juncture, we have the pressure of world deflation weighing on ALL the markets. Against that, we have the various central banks trying to print us into prosperity and at the same time trying to defeat deflation.
How do you battle deflation? Easy, you print fiat money until deflation backs off and until signs of inflation appear. But what happens when you print to kingdom come, and inflation refuses to appear? Well, in that case your junk currency sinks to near-nothingness, and you leave the whole deflation problem to the next generation of devaluing geniuses.
I ask myself, why hold any dollars at all? What’s the danger of holding everything in dollars? And my answer is — when it comes to investing, nothing is certain. Sure, it looks as though Fed printing (now that Obama is in for another four years) will continue for the next four years or, at least, until Bernanke is convinced that he has defeated deflation.
Wait, what could cause Bernanke to halt flooding the system with his fiat notes? I think runaway inflation in tangible goods and political pressure could halt the Fed’s wholesale manufacturing of Fed notes. Scandalous bubbles might appear. Bubbles in college costs, bubbles in medical, bubbles in collectibles, bubbles, in insurance costs, bubbles in food prices, bubbles in energy costs, bubbles in consumer optimism. Of course, none of this would appear in the Labor Department’s phony CPI statistics. As we all know, figures don’t lie, but liars can figure.
At any rate, I’m personally torn between putting all my assets into bullion gold coins or leaving half in gold and half of my assets in US dollars. Very frankly, I’m no longer even thinking of making money in the markets — I just would love to keep my purchasing power intact. On top of that, I don’t trust the government, and I don’t trust the Fed or the Treasury. In their demand to making Fed notes the only legal tender money, I believe the Fed (and the government) would stoop to any trick or law or machination to ensure that Americans must accept Fed notes as the only legal tender money.
The government (Congress?) could pass a law outlawing any transactions in gold or silver or any precious metal. The government could halt the trading of gold or gold ETFs. Or there might be a dozen tricks that the government could use that would outlaw the use of gold as legal tender. Then, there are always taxes as a barrier to even owning or trading gold. As it is, the IRS treats gold as a collectible and taxes you when you sell your gold.
So I dunno, hold all your assets in gold bullion coins? Frankly, I’m afraid to. The bankers demand that I use their rotten fiat notes as money, and believe me, the bankers (the Fed) run the country.
Thus, I am doomed to hold some dollars, and, in turn, my dollars are doomed to lose purchasing power month after month, and year after year. Talk about robbery!
What about owning stocks as a way to keep your purchasing power? Bill Gross of PIMCO thinks stocks will be a lousy investment over coming years, and he thinks bonds will be even worse.
According to Cliff Asness of AQR Capital Management, the average return over the next ten years will average 0.9%. The historical average is 6.5%. Asness calculates that the probable ten-year real returns on stocks will vary between negative 4.4% and 8.3% (above paragraph courtesy of Klein-Wolman Investment Letter).
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Below, GLD, my proxy for gold. Will it rally above its blue 50-day MA? The problem, does gold have the oomph in it to rally above its 50-day MA, which stands at 168.94? (Ed Note: 1 trading day after this was written GLD broke above 168.94 & rallied above its blue 50-day MA!)
Below, DIA or my proxy for the Dow. DIA gapped up on tepid volume, and with the Israel Hamas truce in effect, the DIAs could and should move higher. MACD is about to turn up. RSI is turning up. (Ed Note: Chart 1 trading day after this was written)
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Humans hate uncertainty. We want guarantees, we want warranties, and we want insurance policies. We want to know the future, and we want promises (preferably in writing) which assure us of that future. And yet, what else is life but a constant, ever-shifting drama of uncertainty? The irony behind our desire for certainty and security is that the very tension of uncertainty is the same psychological force that so often drives our greatest gains in personal, and societal, growth.
Our extreme discomfort with uncertainty pushes us to invent, to learn, to grow, and to try and expand our understandings. It pushes us to become better people; to become more than we are today.
Global uncertainty can make the stock market seem like it should be an unpopular place — and yet, always bumping against that global psychology and in opposition to it, there is personal uncertainty that makes the market appealing. Why do people invest in stocks? There simply is no other reason to invest,except the quest for financial security and expansion — which is really just the quest to leave uncertainty behind.
Of course, we can no more eliminate uncertainty than we can become physically immortal; uncertainty is an intrinsic part of life (and of the universe itself, even down to the quantum level). Despite the obviousness of that fact, the majority of us spend our lives fearing (and often running from) the uncertainty of the unknown, in a perpetual state of low-grade anxiety. Thoreau described this perfectly when he said: “Most men lead lives of quiet desperation.”
I believe understanding this psychology is a key to understanding the market. So often, people look at the seemingly ever-deteriorating world and say, “How can anyone buy stocks right now, with so much global uncertainty?” The problem is, this view only accounts for half the total psychology of uncertainty.
The traditional market wisdom says people buy and sell based on fear and greed. That’s true on a simplistic level — but I believe that if one looks a bit deeper, one finds that both fear and greed (in this case) stem from the exact same psychological source: the quest to overcome uncertainty and gain more security (even for people who don’t seem to “need” more security — we’re rarely satisfied at a plateau, and more security for some can equate to additional wealth/power). So we’re fearful when we’re running from it, and we’re greedy when we’re chasing it — but it all ultimately traces back to the same base desire.
This is why even when the world looks bleak and “everyone” is fearful, people are still buying stocks: At that moment, their desire to gain personal certainty/security is greater than their fear of global uncertainty.
This is one reason I think it’s a mistake to look myopically at global uncertainty when deciding whether to buy or sell for the long-term. The fact is, there’s always something going wrong with the world. And if that’s all there was to consider in the psychology, then we’d do nothing but sell stocks short. Don’t forget to consider the other side of that equation.
Speaking of uncertainty…….
…..to view the Market Update, 4 Charts & the Conclusion go HERE
Click to enlarge
Late November and December is a buyer’s market for small stocks.
You can also see where junior resource stock portfolios (for the average retail investor) would be down 20% since the first of October and 40% from the start of 2012.
This would compare to the best of the TSX Venture down 7% since October 1st and approx. 17% from the start of 2012.
…..read more HERE
The call for this week:
All of the recent tradable rallies have begun with a “long-tailed” green upside candlestick chart formation (see shaded areas in chart 1). That “green candlestick” upside move occurred last Monday (INDU +207-points) following the previous session’s upside reversal on heavy volume, potentially signaling the fabled year-end rally is near. That view is supported by the upside breakaway “gap” seen in the ProShares Ultra S&P 500 ETF (SSO/$58.73/see chart 2). But, this morning it looks like the overbought condition will take center stage, at least early, with the pre-opening futures down about 7 points as I write this….
…… in the Financial Environment is occuring that is going to impact every one of us.
Mike describes the nature of the threat and how vital it is that you take it seriously so that you can save yourself and your loved ones from this disaster. It simply does not have to be bad news for you, for you can take action to avoid it.
As with all major eruptions in Markets there are will also be massive profit opportunities. It’s all articulated in Mike’s 8 minute Nov 24th Money Talks Comment below:
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