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The Intelligent Trader's - Long and Short of It
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From: Robert A. Christy Editor/Publisher, ‘The Intelligent Trader’ http://www.intelligent-trader.com http://www.christyinvestments.com
Date: October 12, 2008
This weeks’ ‘Long and Short of It’
Last week was definitely one for the history books. I said last week that this is getting old and nothing has changed in that department.
There is going to be a lot of finger pointing from now until the election. Both sides are going to tell a lot of lies and twist the truth so bad it will be embarrassing. President Bush spoke Friday and if his goal was to reassure Americans that the worst was behind us, he missed the mark.
The President is a defeated man and is simply an empty suit from here on out. His remarks were dull and hollow. We need leadership, not resignation. Plus, putting absolute power in the hands of the Treasury Secretary and not the free market is a concession to the fact that he expects Obama to be the next President. (Heaven help us)
The latest Bullish Percent numbers:
BPNYSE Os @ 4% DEFENSE BPOTC Os @ 8% DEFENSE BPS&P 500 Os @ 2% DEFENSE
Please note, these are the lowest numbers ever recorded. Remember that Bullish Percent is the number of stocks on a Point & Figure BUY signal in its respective market. On the New York Stock Exchange, 96% of all stocks listed on the NYSE are on SELL Signals. Is it bad out there, YES it is. Is this the end of the world, NO it isn’t.
What’s next?
Lord only knows, but the talking heads will get it wrong for sure. I don’t think we are headed for Great Depression II. Central Banks around the world will do everything to prevent that from happening.
Will our economy contract more? I fully expect growth to slow but we won’t come to a grinding halt.
When will we hit the bottom? I have no idea. Nobody rings a bell at the bottom, it just happens. Another thing – we won’t know that we’ve hit bottom until we look back on a chart and see a bottom.
Irrational Panic
The stuff that we saw late last week was not rational behavior. The driving sell orders into the close on Wednesday and Thursday were based on three things: (1) forced selling by institutional investors to meet margin calls from their lenders; (2) mutual funds being forced to sell to meet investor redemptions; and (3) “mom and pop” investors hitting the panic button.
I am probably the only optimist walking around right now. I’ve seen sell-offs before – 73/74; 81/82; 87; 89; 94 bond market, 98 Russian Ruble/Long Term Capital and 98 Irrational Exuberance. In each of these instances, the market’s rebound was forceful and led us to new highs.
I totally disagree with those who say that this time is different. Wall Street is a place of excess. It’s either TOO GOOD or like now TOO BAD.
For the record, I think the pendulum may start to swing the other way in pretty short order. I think so for the following reasons: (1) central bankers will not allow another recession; (2) Bush’s duck is fully cooked and it’s just a matter of time until we sweep out this administration; (3) the market is discounting an Obama presidency and his socialist agenda; and (4) virtually all excesses have been flushed out of the system.
After the market opened on Friday, I did some buying at the -500 level. I added a couple of blue chip names (1/2 positions) to the Long/Short portfolio. Intelligent Trader subscribers can check these out on the member site.
More tarnish on his legacy
I have long used this space to be critical of Alan Greenspan and his handling of the economy while he was the head of the Federal Reserve. His libertarian/Ayn Rand belief system blinded him to the breadth and depth of a problem that took seed during his tenure.
“Not only have individual financial institutions become less vulnerable to shocks from underlying risk factors, but also the financial system as a whole has become more resilient.” – Alan Greenspan (2004)
We are where we are because he didn’t hear what the market voices were saying at the time. His utter belief that Wall Street could do no wrong caused his to turn a blind eye as to the magnitude of the problem unfolding right before him. For example:
1. George Soros does not use derivative “because we don’t really understand how they work.”
2. Felix Rohatyn, former Lazard Freres partner, has described derivatives as “potential hydrogen bombs.”
3. Warren Buffett in his 2003 annual shareholder letter said that derivatives were “financial weapons of mass destruction.” Also in the same letter, he wrote that “large amounts of risk, particularly credit risk, have become concentrated in the hand of relatively few derivatives dealers. The troubles of one could quickly infect the others.”
Had he sat down and talked any of these men, we might not be where we are today. Could this mess have been prevented? We’ll never know and that’s a problem that we are stuck with.
ACORN, Barack Obama and the Democratic Party
There has been a lot in the news about ACORN and Barack Obama’s relationship to the organization. If you want read something that will get your blood to boil, just click to read this article by NRO Contributing Editor Stanley Kurtz; Planting Seeds of Disaster. This article is must reading for anyone who votes.
Monday is Columbus Day which means that banks and the bond market are closed. The stock market will be open as usual. If anything substantial comes out of the G-7 meeting we will know about it early in the week. Keep your hard hat handy. The best thing to do right now is to start making your wish list of the names that you want to own as the market turns.
That’s about it for now. Let me here from you if you have any questions.
Robert Christy
P.S. Are you interested in trading along side me? There are 2 ways to do so. The first way is through my stock trading service, The Intelligent Trader. For just $249 you get a front row seat and the chance to get up close and personal with the market. Just click to learn more. The other way is through my dynamic forex trading service. If you have an interest in trading and/or learning about forex, just drop me a note. I am in the process of finalizing a new mentoring service geared to just trading the forex markets. In your email, please let me know when would the best time to get in touch with you.
P.S.S. Please fee free to forward this to your peers, friends and associates you think would benefit from its contents. They will thank you for it - and so will I!
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Robert Christy is a professional stock/currency trader, money manager, author and speaker. Mr. Christy is the President CEO of Christy Investment Group, Ltd., a registered investment advisory firm. He is also the Managing Partner and Portfolio Manager of Crabapple Capital Group, LLC and the editor/publisher of The Intelligent Trader, a subscription based long/short trading service. At the time of publication, Mr. Christy may from time to time write about stocks in which he, Christy Investment Group Ltd, Crabapple Capital Group, LLC or The Intelligent Trader has a position. In such cases, appropriate disclosure is made. Under no circumstances does the information in this column represent a specific recommendation to buy or sell stocks. Mr. Christy appreciates your feedback and invites you to send it to rac@intelligent-trader.com .
Robert Christy The Intelligent Trader c/o The Christy Investment Group P.O. Box 625 Alpharetta, GA 30009-0625
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