Sunday, June 23, 2013

What Now, Big Boy?...L&C

The four title words are used by my friends and myself in games of friendly competition. They come out at inflection points. Your down, but you make a comeback until the defense stops your plan with time running out the question arises, "What now, big boy?" Lebron James had an answer, while Tim Duncan didn't. In the economic world rising rates are throwing central banker's plans out of whack. They will try to calm the market. They will try to bounce back with the usual spin offs: stay the course, buy the dips, nothing has changed in regards to low inflation and "cheap money." There will be some weeks that these fiat agents(bulls) take control again and some weeks where the natural forces of the market(bears) seek redemption. The above sentence is skewed, you say. You point the finger at the bulls as manipulators and the bears as the true market purveyors. My case is justified in the reaction to the "taper" comments of the Fed and Bernanke. If phony, fiat money is stopped, the market crashes. The word out of the Fed is easing maybe ending. Last week showed what the results will be of this decision.
Bull vs. Bears
Not all bulls are manipulators. They understand the concept that you do not fight the Fed. They realize what the Fed is manipulating the economy. They are just capturing the gains. In the same way not all bears are for true free markets. They see the Fed as wrong. They understand demographics. They want the gains just like anyone else. The problem is the market can be wrong longer than you can stay solvent.
So, What now, big boy?
In my limited market skills I learned one important aspect to the market: volume. Volume on the exchanges has been very low since the market crash in 2008. As the market climbed higher and higher, the number of shares has shrunk lower and lower, however whenever the market declines like last week, the number of shares exploded. This is a tell. The market is saying, we don't believe in the evaluations, but we'll continue to take them, if it climbs higher. On the flip side if the market shows weakness, we are going to get out as fast as we can. Keep in mind what I previously told you, this is a trader's paradise and one of the few times where the individual can make some money by trading. Institutions move shares that number in the millions. We don't. They are the ones who are trapped at higher prices. Short the hell out of them whenever stocks reach their highs and sell at lows using charts for the proper range for a stock. One other important reminder, use your stops to protect against large losses.
To answer the paragraph question, this is what I see for the near-term in the market. Volatility will be with us for the summer and I see the market drifting down to the lows of December 2012. At that point of inflection the question will arise again, What now, big boy?
Liars and Crooks: The NBA is still a phony league because the game is decided by the referees who are appointed by the league to do its bidding. Bosh fouled Green in the last shot to game six with no call. This championship was one of the best ones due to the limited calls by the refs, but true to character, their calls picked the winner. This is just one of many aspects that cloud the NBA like no compensation for a player leaving one team to go to another. The best always end up in LA or Boston. I became aware of these crimes way back with Stockton and Malone in the small Utah market. As good as they were, fouls were called against them to allow their opponents to beat them in crucial moments. This was because of the small TV audience and all the economics that go with it. That is why I love the National Football League. It is more open and fair to all its members. Any team can win in any year. Go Niner's!