“Fredd, looks like a 10-12%
correction in store for the markets this month.” This sentiment was uttered in a post script
comment to me just a few days ago. The
Kid, proprietor of the site Diary
of a Right Wing Pussycat has gazed
into his relatively reliable crystal ball and has spoken.
If this is indeed our future,
we would all make some serious scratch if
we were to short the shares of some index stocks such as QQQQ and SPY,
which mirror the general direction of assets in the exchanges.
So far, I have made some
pretty good bucks on Kid’s predictions, although he has missed the mark
recently on a marijuana stock (PHOT), the only blight on Kid’s record. And I’ll be danged if so far this month,
stocks are certainly trending in that general negative direction.
From an all-time high of
17,138, the Dow Jones index has fallen to 16,443, or about 4% in a few
weeks. We’ll give The Kid some slack,
and allow his prediction of ‘this month’ to start at the high of July 22nd
or so, and continue for 30 days. To
reach The Kid’s prediction of at least a 10% correction, the markets must lose
another 1000 points or so in the next two weeks, or by August 22nd.
Go ahead and ask me if I am
betting the farm and pumping my life’s savings into equity shorts. Not on your life. The Kid, even with his huge, bulging brain
working overtime analyzing the markets is probably wrong on this
prediction. We have two weeks to see,
but I am betting on the markets staying the course and moving at worst
sideways, but probably ticking upwards in the next two weeks.
Here’s why: Obama is president, and people don’t like Barry’s
effect on the markets. That is not
arguable, since both times he won, in 2008 and 2012, the markets tanked the
following day. He is a socialist (not even arguable here
either), and firmly and steadfastly believes in redistribution of wealth. The market doesn’t share his beliefs in this
regard, and has been strangled owing to so much capital sitting on the
sidelines and overseas since his election.
Imagine how equity markets might have performed had Mitt Romney been
elected in 2012 – perhaps a Dow Jones topping 20,000 or more. No way to tell now, but my theory is as
follows:
There is pent up demand for
equities, but investors are tentative in putting their hard earned money into
the markets in earnest until they are convinced that uncertainty regarding tax
policy, foreign policy and health care costs has been alleviated. The administration has also set the Fed funds
rate at 0.0%, which affects interest rates throughout the economy, so bonds and
CD’s are not attracting any money, either.
So where does all the money
go, waiting for some certainty to return to the markets, besides sitting
overseas and in low interest bearing cash accounts? The money that is not sitting on the
sidelines (a huge amount, folks, YOOGE) is still in the market, since the stock market
is still the only game in town. And this
‘town’ consists of the entire world.
Once Barry is gone, all of
that pent up demand for investments that have attractive ROI’s is going to be
unleashed in a big way. When President
Christie, President Cruz, President Paul or President Romney (a dark horse) is
elected in 2016, watch the markets hit dizzying highs. We could possibly even see a huge surge in
stocks if the US Senate changes hands this November.
Until then, there is still no
place else to park your spare cash that earns anything close to reasonable
returns: the US equity markets. Our
feeble recovery is simply reflecting reticence on part of worldwide investors in
investing in a socialist-leaning American economy. It’s still the best bet in the world, but it
will be a much better bet with adults in charge, rather than the hapless fools
that are holding us back now.
Either Kid is wrong, or I am
wrong. We will see in the next few
weeks, so stay tuned, boys and girls…..
0 Yorumlar