Navigating IBM, the markets and the Fed, Fed, Fed
No trades for me today so far. We took advantage of panicky sell-offs last week to get in a few trades and tranches and like I always remind you guys, we want to take the best pitches we can get before we swing. Steady as she goes then for now.
It was an an ugly open, IBM partly to blame, but only partly and thus stocks are roaring back early. And is IBM an indicator for the broader economy and markets? Well, my analysis points to more economic improvement, even for employment and Main Street in months ahead and inflation at the grocery store accelerating — though I don’t think that means the Fed’s going to react to those realities anytime soon.
With continued cheap money for corporations, margin-enhancing policies from the government at all levels and 0% rates still forcing savers into risk assets etc, I expect we still have more bubble-blowing bull market ahead of us. By the time the Fed finally acts to “tighten,” the bubbles will likely be much bigger than they currently. Important to remember too, is that the bubbles will actually probably continue to inflate even after the Fed starts to tighten.
You can’t flood the corporate economy and force savers into risky assets like stocks for years on end and then contain the effects of those policies by cutting back on your pumping. Jawboning the end of excessive, emergency liquidity measures isn’t going to change anything, though it will likely give you a small-term market correction if and when the FED finally actually ends all forms of QE.
0% interest rates are going to inflate huge asset bubbles and especially stock market bubbles, as I’ve been saying for five years now. 1% will still cause bubbles. Maybe a 2-3% Federal Funds Rate might start to draw money out of the markets and shift inflation down to a lower gear. So until the 0% interest rate itself is actually being raised, you want to keeping trying to ride the bubbles being blown all around you.
So keep fighting the Fed and stay the course, follow the playbook and be vigilant as well as disciplined in your approach. You’re not supposed to be trading for an adrenalin rush. Rather, keep the big picture and the long-run reasons for risking your hard-earned money in the markets in mind.
And in the meantime, I counted about 17 percentage points worth of moves in the SPY last week, as it ran from ups to downs. Absolutely crazy volatile lately. While today’s looking like a reprieve from the gyrations so far, it’s a long day ahead and an even longer 10,000 days ahead of that, so don’t rush in.
My point is that with all this as a context, if I didn’t own the stocks I wanted already, I’d still want to scale into some of the best most Revolutionary Investing stocks like my usual $GOOG, $FB, etc, nice and slowly as usual. Steady as she goes as the volatility gives you opportunities.
In other “Humility-teaching news” today, IBM’s huge 7% hit comes about 2 weeks after I wrote: “Finally, I am indeed going to go ahead cover my $IBM short. IBM’s still got their aggressive accounting methods and legacy technology issues to deal with, and the stock is one of the few megacap tech stocks to have not participated in the bubble-blowing bull market over the last couple years while we’ve been short it. But I want to continue to clean up the portfolio.”
PS. Here are the commercials for Scutify’s new ad campaign that will be running for the next four weeks on SiriusXM channels Fox News, Fox Business and CNBC and starring my co-anchor Rebecca Diamond and me.
