The Fleecing Of America
Forget about the European cattle problem,
we have a serious case of “Hoof in Mouth” disease amongst our analyst community. By the way, have the networks scheduled
Abby Cohen’s public apology to the American public yet? Let me know so I can program my TIVO.
The brokerage houses, star analysts and stock gurus on television must be very proud of themselves, indeed. Not only did the investment banking community succeed in their conspiracy to create one of the biggest equity market bubbles in the history of human civilization and make trillions of dollars on bringing bogus initial public offerings to market, but they also succeeded in completely brainwashing an entire era of investor. A great majority of the public only believes that stocks can go up. When they go down, they feel as though something is wrong…. like something is broken.
By observing the popularity of television shows like CNBC over the past 5 years, we can really see how the ‘get rich here and now’ mentality fabricated by the giants on Wall Street permeated society and drove the masses on a campaign of greed. Even with the the Nasdaq composite declining over 60% from its all time highs of twelve months ago and the Dow Jones Industrials losing nearly 1000 points in the past 4 sessions we still have not begun to observe the slightest bit of fear. Rather, we have a slew of average investors and analysts continually tell us why we should be buying stock here. “Don’t fight the
Fed,” right? Isn’t it just as simple as that? Isn’t that just a fool-proof way to print
money… just buying stocks when the FOMC is in an easing cycle?Â
Worse still, we have had analysts and fund managers tell investors who are in losing positions to “dollar cost average” to lower their cost basis. Excellent advise… throw good money after bad. I would bet that most people used margin to acquire more shares of stock to achieve this dollar cost averaging and as such, have experienced debilitating losses as a result of this. I hate to continually be the bearer of bad news, folks, so please don’t shoot the messenger. The simple fact is, the economic burdens faced by our economy and society as a whole will not and cannot be repaired by simply lowering the prime lending rate. It is a fallacy and a fabrication of the media that Fed rate cuts are the panacea for all ills.
Rather than speculating about what the future holds in terms of excess inventories, consumer confidence, end user demand, and “lack of visibility” (the new hot catch word amongst tech companies that are getting creamed), why don’t we focus on something rather obvious…… something rather chillingly obvious. That is, the current unsustainable trend of personal debt continuing to outpace personal savings. In addition, figures show that the amount of household liquidity, that is, liquid cash people have available to pay their monthly bills is at a historical low. In fact, the average American household cannot meet their monthly liabilities with the liquid cash that they generate. Is anyone getting nauseated yet? Good, let’s go on.
To compound the potentially eerie culmination of this debt vs. savings scenario, let us factor in another quite disturbing phenomena. That is, the percentage of household assets as stocks reached an all-time high last year at 44%. This figure has dropped just slightly lower to 42% this year. The 45 year average of this figure is roughly 24%. During prior bear markets of the 1967-8 and 1973-4 eras, this figure was chopped by nearly half or more to indicate the public “throwing in the towel” on equities. This figure clearly demonstrates that the public is still enamored with stocks and has not even begun the capitulation or “throwing in the towel” process. In addition, it appears as though massive liquidations of stock holdings appear to be the only avenue available for most households to pay their rising debt. As Karl the greenskeeper in Caddyshack said to the bishop who wanted to squeeze a round of golf in before the big thunderstorm, “I say we play on….. I don’t think the heavy stuff is gonna come down for a while.”
So let’s see…. people are nearly maxed out on credit, they have no savings, they are roughly two paychecks away from being homeless, the number of layoffs get larger every day……….so……….. they turn to their stocks to be the answer for their problems. But, alas, their stocks which they were persuaded never to sell by the Wall Street Mafioso are getting crushed. What will a Federal reserve rate cut do to help these people, make it easier for them to get even more credit and get deeper in the hole? I don’t know what the answer is but apparently Larry Kudlow thinks the Fed could save the day once again. Reminds me of the parent that the comedian Chris Rock talks about that used to think Robitussen could cure anything. “Dad, I have a bad
cold”… “Robitussen.” “Dad, I broke my arm”… “Robitussen.” “Dad, I have
cancer”…”Robitussen!”
How does the old saying go? “Give a man a fish and feed him for a day, teach a man to fish and feed him for a lifetime.” Looks like the United States Federal Reserve will forever be entrenched in the ideology that continuing to throw out fish when people are hungry is a good thing. It’s clearly not a good thing and this unsustainable and most unfortunate cycle will not last that much longer.
Yet our friends at the brokerage houses want you to go out and buy consumer cyclical stocks because, as they have shamelessy stated over and over again “the economic environment in the 2nd half of 2001 will be excellent for retailers because of the economic stimulus which will be provided from the proposed tax cut as well as continued FOMC rate cuts. We believe that these events will give the consumer added incentive to buy.” If anyone actually believes this, you may need to back away from trading right now and get some counseling (deprogramming, actually). This is a total setup, folks, just like the one we witnessed when
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Now I hate to use the catchy song from that great “Sex and The City” show on HBO, but…….. MO MO MO, HOW DO YOU LIKE IT? HOW DO YOU LIKE IT? Dave, I love ya buddy, but it looks like
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My commentary on March 07
gave us another outstanding entry in our ongoing battle with “safe haven stock
extraordinaire,” Phillip Morris. I suggested another entry in the 52-53 range and that is exactly what we got. From that suggested additional entry point, the stock has sold off nearly 10% in less than a week. If you got stopped out from my previous suggested entry, you did the right thing. You have decided to be a trader, and by definition, a trader moves in and out of his positions as circumstances dictate. It is up to you to determine your pain tolerance before you engage in any short positions. Shorts are a lot harder to play than longs, that is why 99% of the amateur traders out there can’t do it and 95% of institutional traders only trade from the short side. Define what kind of trader you want to be and be ready to evolve as a trader as the market continually changes and morphs. On the brighter side of things, it appears my derriere will be spared the humiliation of being the subject of public mockery at the TM 2001 Convention.
Amazingly, at the end of trading today the helpful commentators on CNBC told us that “we are setting up for a rally tomorrow.” Really? I always thought nothing spelled “rally” more than getting a 300+ point decline in the Dow. In addition, judging by the fact that the TRIN closed with a 2.32 reading and actually increased into the close, it appears the “anecdotal rumors of market on close orders” that Art Cashin told us about prior to the close today may have just been hallucinations caused by some bad pastrami he had for lunch. Bravo again, Art. Make sure you give Pisani some credit for telling us about all the traders he talked to who were covering their shorts last Friday morning.
Outstanding timing.
No charts today. We all know what the Dow chart looks like, I don’t need to pat myself on the back once again.
Thank you for all of your wonderful comments that I have received the past few days. You have no idea how happy it makes me to hear of the great success many of you have experienced as a result of including my commentary into your daily arsenal of information.
As such, I am considering beginning a positional/swing trading service through this website that offers weekly stock picks as well as detailed chart analysis and updates. It is clear that the market will present a very challenging environment for traders in the next few years ahead and I want my service to address this new type of trading environment. Let’s face it, the runaway moves we experienced from 1998-2000 reaped us a lot of profits with the “buy ’em up 8 and sell ’em up 38” approach. There needs to be a new type of trading service that addresses this changing trading environment. If you are interested, send
Connie an email and let her know. If enough people are interested in this service, I will get it going with
TradingMarkets.
Hey Gary
K, you called Marder your friend yesterday but didn’t mention me as your friend. What am I… chopped liver? I know Marder is a funny guy, but didn’t I keep you entertained during his absence?
Have a good night and wait until you see the whites of their eyes before you buy anything.
Goran