A big shout out to 2Pac-- It would have been your 40th birthday today had you not gotten yourself shot to death due to some stupid 'rap battle'. Coulda, Shoulda, Woulda... fear not Mr. Pac-- your legacy lives on to this day as white teenagers across the country have sex to your music in the back of of their parents leased Cadillac and Lexus SUVs after every homecoming dance... It is good to go out on top.
A long break clears the mind for a writer, and I have to say that my mind is crystal clear. This is the complete opposite of the markets. The S&P looks pretty beat up these day. I suppose that is the same feeling as the Jones' had in 2007 when their 900 sq ft town home dropped 120K in value and they couldn't cash out enough to support 3 vacations, a few Louis Vuitton bags for the girls, a shiny new leased Escalade and weekly Bloomin' Onions benders at Outback Steakhouse. When the QEII party ends, there is no after party... for the time being that is (see Nov 2011 if you have a time traveling Delorain to see the next QE plans).
The markets are in an interesting spot right now. The limbo bar has been set pretty low, meaning that 'less-bad' data can come across as 'phenomenal' to those in the doldrums. Today was a perfect case and point to this argument. We had not only another week of crummy jobs numbers, but the Philly manufacturing numbers were about as ugly as the VHS tapes you found of your parents doing the nasty to Madonna's 'Like a Virgin', when you cleaned out their basement before the short-sale. Just plain terrible data today-- some of the worst we have seen in years... and the market shrugged a mid-day sell-off to finish ahead.
We are most likely at a point where the market will kick in a short-term rally. The 10-year has been flat for the week despite all the nastiness from the NY and Philly manufacturing numbers and TLT has had a bear of a time getting over the 200-day moving average hump. This coupled with today's turn-around in the markets points all signs to (sucker's) rally is immanent.
It should also be pointed out that uber-bull Jimmy Cramer called for a 10% correction, which should be reason in itself to do the complete opposite and ride a nice shorty run on the SPY. If Cramer Says Sell... BUY BUY BUY
Hunting Naked in the Woods Drunk in the Dark with a Machine Gun
Secular bear markets bring on intense and often erratic short-term rallies that are often explainable. Usually the financial porn media finds a 'reason' and rides the living hell out of it until the rally fades. Over the last year we have ridden the 'Rebirth of American Manufacturing,' 'The Jobs Recovery,' and 'The Consumer Renaissance,' and all of them have been complete bull excrement. The only reason for any rally since last October was QEII. Plain and simple-- kill the dollar and put upward stress on commodity prices, which in turn will raise raise equity prices. Higher equity prices make people's 401Ks stronger and they spend more money when they go to Dennys (I'll have the 'Moon's Over My-Hammy' please!) QEII was no different that a smoke-and-mirrors show the local auto dealer puts on for you when you go in to buy a car. Create the illusion of 'something good' right now so that you will buy in and sign on the dotted line. QEII worked great for a few months, but now the party is over. The effects were similar to drinking 4 wine-coolers very fast-- a crappy buzz that leaves you feeling violated with a headache soon after. And the headache is not going away because the hair of the dog (QEthrEE) is so far off at this point due to political hand-slapping.
Still, this market will make you think the grass is brighter in the near future. When the markets recover a good portion of the losses you will hear something about 'Lower gas bringing back the consumer,' or 'Stay-cations bring stronger growth to retail as more consumers shop near home,' or 'job-seekers happy with part-time work as they get more time with family.' It will be something ridiculous for sure.
The problem is that many people don't know the difference between bad (advice) press and real (information) data. A Philly Manufacturing number that is sliding faster than Tiger Wood's apparel sales is real data. A story on Dow to 20.000 in a year is just bad press. If you had never been hunting before and you took a trip to Colorado to land your first kill, you would not know the difference between bad advice and real information unless you had done some research. If you blindly went into your hunting expedition and your 'guide' told you that all real hunters went hunting naked in the woods, drunk in the dark with machine gun, you would probably start tossing back Tequilla in your birthday suit when the sun went down. You may actually enjoy the experience (if you can find someone to rent you a machine gun at 10,000 feet) but you would not have gone hunting.
Remember that real data does not support any rally right now-- jobs numbers suck, China is falling to pieces, QEII is done, commodities are falling apart, the dollar is strengthening and Europe is just plain f'd up (that is 2Pac speaking peeps)... Smells like a recession brewing to me!
With a good chance of a short term rally for the S&P, make sure that no matter how much fun you have that you don't wake up naked with a hang-over in a field, out of ammo.... surrounded by ANGRY BEARS!
I hope you are smarter than that...
PS-- sorry for the break-- took on a new job that required me building out a sales team on a short time frame. I promise to post more often. Cheers and thanks for reading-- We greatly appreciate the support