Morning Market Thoughts

by DAN Good morning. Today we will get indication of what the Fed is thinking as the minutes from the last meeting will be released. Should be interesting. Asian stocks were strong, and one of the reasons given for the rally is that William
Dudley, New York Fed President, said that they might raise rates as soon as next month,, warning investors that they were underestimating the likelihood of increases in borrowing costs.

He said the same thing before the last time the Fed didn’t raise rates. Now, he’s saying it before the Fed doesn’t raise interest rates. Any idea what he’s going to say before the next time the Fed doesn’t raise rates. It has gotten to the point where investors just don’t listen to Dudly or any of his cohorts when they play the “We’re gonna do it! You wait! It’s gonna happn.! game.

Any questions?

Also, Gawker is being bought by Univision, the media company that serves the latin american, spanish speaking community. Honestly, I don’t get that one. Strange bedfellows.

One thing that bugs me about the current market lift is that there are an increasing number of respected money managers who are saying that being in cash is ok. They are pretty confident that their high cash allocation is not misplaced. They’re comfortable. Now, this is either troubling or comforting, depending on how you view this “go to cash” trend among large money managers (otherwise known as “smart money”)

First, you can view this as bullish. It the market continues to move higher without smart money participation, they will have to capitulate at some point. They don’t get paid to manage dollar bills. they get paid to make more of them. So if the market does NOT start falling, then this smart money will start coming into the market because it’s the smart thing to do. We will be rewarded for holding stocks because their buying will push our stocks higher. On the other hand, this can be a bearish factor because, if the market falls, these money managers will pull away even more for a short period of time and let the thing that they have been waiting for (a big correction) run its course. Ultimately, they will swoop in and grab stocks. They will be rewarded for their patience, and for the panic of those who sold with no hesitation. They just wanted OUT!

Here is my approach. In our pension account, and a couple of old retirement accounts that i have from pre-SMM days, I am not doing much at all. I’m reviewing the stocks that we are holding and making a few changes. I’d do that anyway. But generally, I don’t do much in our pension account. They are long term. I accept the fact that, if the market corrects, these accounts will take a hit. If the S&P falls 10%, I expect our large accounts to fall…10%. I wish that wasn’t the case, but I’m ok with that because I just don’t have time to actively manage a long term account. I’m busy here — focusing on SMM/OMM and also working on new educational projects that will help members immensely.

In my short term accounts, I only have a handful of positions. Now, I think I have about 6. That’s all. Most are working, while a couple are not. They’re not at a point where I’ve decided they are not going to work. They’re just at a point where I’m getting impatient and am starting to look at them in the way someone looks at a serial liar who just assured me that he was telling the truth. Lots of suspicion. At any time, those could be sold for small losses…or small profits that are much less than I had hoped for. But my cash in those accounts is pretty high. Honestly, I’m not making a lot of money on those positions because of my large cash allocation. But I’m ok with that because I am basically playing defense. If I’m driving in a cross country race, I’m going below the speed limit because the road I am on has a lot of hairpin turns, pot holes, and have the possibility of doing a Thelma and Louise off a high cliff. So I’m going slow, and am just happy with the progress I am making. I know this will change soon, and I want to be intact when the change occurs, and the big opportunities present themselves.

In my trading positions, I’ll vascillate between a small, starter position, a midsize position, and a large position that I am almost immediately looking for an excuse to lighten up on. The market is that tight. Just no big swings in most stocks.

I have been focusing on finding stocks that do have a bit more movement in them, and that you will be able to make a good profit on. Several stocks I have recently covered have done very very well. I suggest that you focus on those, rather than the ones that are doing nothing, but that you hope will start paying off because you are a fan of the stock. You made money on it before, and you’re hoping to make money on it again. If it works, great. But if it doesn’t, then be a little creative, do a little work and think, “Is there another stock that I can trade for a payoff NOW? I can always go back to Old Faithful when it starts bubbling.”

At some point, we will see a big change and we will all be thinking, “Ah, this is the reward for my patience and conservative trading. Now I can make some money…and I’m in a better position to capitalize because I’ve been spending my time focusing on learning my craft and getting better at trading.”

That change will definitely come. It always has; and it always will. This is the cycle of markets. Either roll with it, or be rolled over by it.

See you in the forum.

–Dan

Market Update