In the Trading With Cody Chat Room, I’ve been joking all morning about being “Your Friendly Neighbor Perspective Man.” But in all seriousness, I think there’s some real insights to be gleaned looking back at my analysis back when the markets were half their current levels a handful of years ago.
I still think we have more Bubble-Blowing Bull Market in many stocks for the next year or two at least. But I don’t think I’d want to be rushing into the market with a bunch of new cash with the DJIA up 180% from those lows of 2009. Remember how scared you were about the economy, the stock market and the financial system itself? Remember how gloomy and fearful everybody on TV and in the papers were? There certainly is a lot more optimism, hope and outright euphoria out there these days. Keep perspective here with your Friendly Neighborhood Perspective Man.
I’ve highlighted some captions in bold that underscore just how much things have changed in the economy, the stock market and the reflexive mindset of traders, economist and investors since I turned from short-term ultra-bearish at the end of 2007 and 2008 to bullish again in 2009.
Don’t Panic Now That We’re Here: Look for DJIA 7500 Before DJIA 6000
The economic news is horrible. The earnings news is horrible. I wasn’t joking when I screamed last that there was absolutely no way that GE would keep their dividend this year back when Immelt said it was safe last month. It wasn’t. But that’s also now reality and that reality is now priced into the market.
As I proposed to Ron Paul, Peter Schiff and Judge Napolitano on Strategy Room yesterday — we might want to consider the idea that all these trillions of worthless dollars that the government is injecting into the economy might actually provide some fleeting, temporary, illusory cushion of economic activity.
Whatever the reasons, the economy and markets will have counter trends against the ongoing bigger bear market and economic downturn that we’re locked into.
The time to freak out was at DJIA 14k and the millenials on Happy Hour were telling us that they could and should demand nap time in their contracts because there’s so much more demand for their labor than supply (true story!)
Don’t freak out now that we’re here near my DJIA 6k target. If anything, catch your breath. I’ll go out on a limb here and say that we’re more likely to see DJIA rally 15-20% before it falls another 10% from the 6600 level as I write. Remember that just last week DJIA was close to 7500.
Revolution Investing: Why you should be buying into this panic RIGHT NOW
PIIGS! PIIGS! Sovereign debt! Fiscal crisis! Commodities tanking! Deflation! Wait, no inflation! North Korea war! China currency! The PIIGS! Please find me something to panic over RIGHT NOW! Please. The developed world is teetering, society’s collapsing, the banking system is about to be reformed into something nobody understands, and I need out RIGHT NOW!
Then again, maybe the time to buy is when the headlines are full of nothing but reasons to sell. Maybe the time to sell was a few weeks ago when the markets had been repeatedly hitting new yearly highs and nearly 90% of the S&P 500 was trading above their 4 week moving average. Wasn’t it just a few weeks ago that you even had Robert Gibbs, the spokesman from the White House, saying that the strong markets were reflecting better economic times ahead and probably are a byproduct of the current Administration’s policies?
Long-time readers and viewers of mine will point out that my nonchalance about these ongoing EU bailouts and macroeconomic concerns are a far cry from when I was sounding the alarm at DJIA 12k all the way down to the DJIA 6500 during the dark days of the credit crisis and Lehman/Bear Stearns collapses and the ensuing Wall Street bailouts.
Take the other side of this mindless panic over….PIIGS! Chinese Treasury holdings. Oh, and the Yuan! The Euro’s collapsing, but that’s good for exports in the EU, right? No, the dollar’s doing well, so that’s bad for exporters with exposure to the EU, right? But what if the EU comes back? Well, there’s also deflation and inflation to worry about! Fiscal concerns around the world have the headlines reading: “Is the world broke?”
I’m thinking we might be seeing a blow-off top in the “fiscal crisis concerns” market, and I think the key to making money here is keeping your cool and to get longer into weakness below DJIA 9850. Cover some shorts (we’re covering one short that’s been a big winner for us already in the portfolio today) and start scaling into some longs and even some calls in the best names that you’ve got in your portfolio.
How to trade the biggest stock market bubble ever
Look at the impact of unprecedented monetary easing and ongoing 0% Fed loans, or at the record-levels of corporate cash, both of which will continue funding buybacks, or just look at the continued policies from both/either parties all of which are intended to expand corporate profits and lower tax payments for the biggest companies in the country.
None of is a good thing long term…but is it BEARISH for the stock markets? These macroeconomic trends and political forces are not good for the broader economy and they’re certainly not fair or good for main street…but all these trends that he’s talking about are WILDLY BULLISH for the stock markets.
And when you think about how the economy and stock markets can and do unhinge from each other for quarters, years and even nearly up to a decade at a time, you can more easily allow yourself to see that the most likely outcome here is that a new, bigger than ever stock market bubble is coming.
The rush to label everything in this country a disaster right now is tempting. And with continued unemployment at levels we’ve not seen in my lifetime and probably yours either, there’s no denying that things aren’t great out there for the vast majority of Americans.
But that reminds me of the times back in 2007 when I’d be on TV or at a hedge fund conference and these same people who are so bearish today were explaining to me that the markets would be in bull market mode because of things like housing, real estate, unemployment and banking profits all being so strong.
See, we’ve got to be flexible. Despite the fact that conventional wisdom preaches “buy and hold”, the fact is that navigating these types of huge moves in the stock markets and the economy make a huge difference to your performance over time.
And see, there’s that lesson again — that the markets and the economy were about to separate. The economy continued to tank, unemployment continued to rise, real estate continued to implode, and main street continued to struggle, but the markets have nearly doubled since that 6600 bottom. You had to pick your timing to catch the gain just as you had to pick your timing earlier to avoid the crash.
And for what it’s worth, I still consider Google and Apple two of the must-own winners of the app/smartphone wars just as I explained there in that video and just as I’ve been explaining on these virtual pages since I bought Apple at $7 a share and Google the day it came public. That much, hasn’t changed. And yeah, there’s something to be said for buy-and-hold after all, huh?
Time to buy: Housing’s dead; long live housing
Are we, as the headlines suggest, heading into a double dip recession and is real estate already in one what the heck do we mean by real estate “strength” or “weakness”. Do we mean prices? Are home values improving? Not much, but they’re not collapsing anymore, and stability alone is a huge improvement.
Real estate was awful in the years leading into the credit crisis, say 2006 and on, when the whole country’s real estate market turned south all at once. Something that Ben Bernanke at the time had testified to Congress was an impossibility — as it was actually happening. And yes, real estate’s not exactly going gangbusters throughout most of the country, though there are pockets of real strength in upper-middle-class home markets in almost every region of the country.
Real estate might not drive us into a new economic boom, but I’ll take the other side of the ongoing, seemingly endless talk of the next real estate collapse now that all the same people who told me real estate would never hurt me are panicked.
I continue to think, as I’ve been saying for about a year now, that real estate’s done collapsing and while I have no idea whether home prices will be up this time next year vs this time this year, I do expect that if you buy a house or invest in real estate just about anywhere that’s seen prices drop 40% or more from their highs that you’ll be up on that investment five years from now and up big on it ten years from now.
On the other hand, as I keep telling everybody who will listen — you could just get in front of the still-just-barely burgeoning App Revolution, which will entail a customer base of more than one billion smartphone users within the next five years…Google’s my current favorite play in the sector as it’s stayed down from its highs of 2007 long enough to have grown into its price and now, especially considering its huge cash balance, is very cheap at less than 12x earnings. Apple’s good too. I also added a new pureplay on the app revolution to the Revolution Investing newsletter portfolio yesterday.
Making the hard trade
I’ve no idea if we’re at a short-term, intermediate- or any other kind of bottom right here right now this morning with the Nasdaq at 2,953, down about 7% from its recent highs. But the outlook for our stocks remains very positive and the economy/market continue to present themselves bullishly for revolutionary tech stocks, and we were selling at much higher levels and have been patient waiting for better pitches to put that money back to work.
These are definitely better pitches, whether they’re the exact bottom or not. So you make a couple swings today. And don’t get too leveraged or crazy or too aggressive for you, whatever that “too” may mean for you personally.
See the future
I’m still pushing it hard because I’m still picturing much more success for me, my investors, my readers, my followers and fans in the future.
Part of that future, I do expect, is more of the ongoing App Revolution and bubble-blowing bull market that we’ve been positioned for.
Whether or not the Fed continues to taper a few tens of billions of dollars here and there in their outright QE, nothing much has really changed in regards to all those trillions of dollars that the government is continuing to inject into the economy annually. Which is a large part of why I continue to ride my long-held Google, Apple, Sandisk, Facebook and other stocks positioned to boom. Speaking of Facebook, this week’s Revolution Investing newsletter, published tomorrow, will be all about why I own Facebook and not Twitter.