Is this just a pullback? Could be. I hear that from the
market gurus on TV. We have been on a tear heading up and it is unlikely that
the markets will do an about face and head South without a thought. But there
is one thing unique about the current market. And that is how fast and furious
the slide of oil has been.
I remember reading Thomas L Friedman’s book “The Lexus and
the Olive Tree” thanks to my daughter. She had just developed a strong interest
in International Relations and gave me the book to read. I felt I should read
is just because she was interested. Since then I found Thomas Friedman to have
a wonderful mind. I recall him writing about the Mexican Minister wringing his
hands and watching the monitor in his office that showed the Mexican Pesos in
free fall and asking why are they doing this to us? Who is the “they”? “They”
is not just another country. “They” is not just the banks. “They” is an enemy
he cannot see. “They” is the collective. “They” is the collective’s punishment to
his country for their inefficient policies and for corruptions that prevent efficiency
in the markets. The collective will punish inefficiencies.
And now a major country like Russia is asking the same
question. The price of a barrel of crude oil and the Russian ruble has fall precipitously.
While Russia flies its war planes cruising around the world, looking for the
enemy, it cannot see its real enemy bringing their economy down…. themselves… traders
are punishing Russia for invading Crimea and not using oil monies to develop
its own industries and infrastructure. Lack of open markets. Harassing American
businesses. Taking over foreign companies… Inefficiencies. All these make Russian
markets less efficient and the collective heaps a fitting punishment on Russia for
that.
And where are the American politicians who were once blaming
the speculators for driving up the price of oil? Why are we not singing praises
for those speculators now for bringing down the price of crude? Oil has roiled
the markets and created an eerie new uncertainty. This is a place we have not
been before. It should feel good…. I know I am paying less for gas (petrol)
than I have paid in a very long time…. And the price of goods should come down
as transportation costs should be less. Airlines are making higher profits.
Planes are full. The retail industry has lower costs moving goods. Schools and
State budgets are seeing a massive drop in expense for busing kids to school.
So why is the market sending down signals? The answer is one word… uncertainty
has increased.
Take a look at charts on DIA (Dow Jones 30) and SPY (S&P500).
They are both flagging down signals. QQQ (Nasdaq100) also has a down signal. And
you guessed it… Long term treasury bonds have been flashing an Up signal. See
chart below on TLT. I have sold call spreads on QQQ betting on a down side for
the short term. I sold off my holdings in SPY and QQQ. And I purchased some TLT
that is up right now. I do have some long holdings in my 401K that I will need
to exit that is pulling me down. Fidelity will be sending me their nasty
letters about frequent trading… I hate that. I will never get a Fidelity
trading account outside of my 401k for this hypocrisy. But I should never say
never… time to work on my next project….
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