December 6, 2016
Stocks aren’t even close to stopping?
FOR SURE, we are beginning to see some suggestions from all the Wall Street geniuses that maybe the market might (in their opinion) remain solid in 2017, but there is still a ZERO degree of euphoria as to what is happening RIGHT NOW…The truth is, all of the talking heads have had this 1250 point rally…since the election…shoved down their bearish throats and they are now only begrudgingly accepting the reality that new highs are NOT what they were predicting…And really, when you get down to it, as I have documented over and over this year, those are also the same people who have been saying, “Sell!”, going all the way back to January.
The point is…The market is STILL making new highs but do you see anybody jumping up and down and telling the masses, “You GOTTA be on this…NOW!”? And believe me, that IS what we will need to see SOME evidence of before you can even begin to think this run might stop…Certainly you haven’t forgotten the way it gets AFTER a move is really over…say, maybe another 1000 points higher…maybe in a matter of days or weeks…and all the talking heads are all, AFTER THE FACT, just “SURE this bull won’t be stopping any time soon!” Really. Do you see ANY of that yet? And what should that tell you…in this MOB PSYCHOLOGY GAME…?
I SEE THE MARKET CONTINUING TO ERUPT HIGHER…I THINK THIS “SLOW GO” IS GOING TO ACCELERATE…AND THERE IS NO TELLING HOW FAR, AND FAST, THE DOW (AND ALL THE OTHER INDICES) MIGHT STRETCH BEFORE YOU DO SEE ALL THOSE ANALYSTS AND YAKHEADS START GETTING EXCITED.
And most notably, I would also add that there is probably no one at the Fed currently thinking along these lines either (expecting the rally to be roaring higher), but if you were to ask them, “If the Dow was at 21,000 come January, do you think it would affect your opinion as to how FAST rates needed to rise?”, the answer would most likely be , “Hell yes!”
During the past three decades of watching rates go up and down, I would almost say that I have yet to see ANY Fed campaign to raise or lower rates proceed according to some nice neat plan…Those Fed Governors, just like everybody else, are trying to predict the future, and believe me, just because they are, “THE FEDERAL RESERVE BOARD”, and all experienced, intelligent and very dignified bankers, does NOT mean they know what is going to happen…I mean, all you have to remember is that NOBODY at the Fed even began to recognize what was happening in the mortgage crash until it was at least 50% done (or even later)…nor did they know the Dow would then lose over 50% of its value…nor did they have a clue that the result would be the devastation of the Great Recession…And nor did any of them ever dream…just months before it became a reality…that the world would actually see Negative Interest Rates…
I don’t list all those cases of, “They didn’t see it coming…at all”, to imply they are all a bunch of fools…Not at all…But simply to reinforce the idea that they DON’T know what is coming…and they do, as I have seen MANY, MANY times these past 36 years, totally misread what is coming in the economy and what they need to be doing…or how fast and aggressively they need to be acting…which is precisely where I think we are now.
NO, I AM NOT ANY SMARTER THAN THEY ARE…BUT THERE DEFINITELY ARE TIMES WHEN THE EXPERIENCE I HAVE…AND MY TOTAL INDEPENDENCE AS AN “ANALYST”…AND MY RESEARCH…AND MY INHERENT CONTRARIAN INSTINCTS…AND LUCK…DO ALLOW ME TO SEE WHAT IS COMING WHEN OTHERS MAY NOT…AND AS OUTLINED HERE FOR MONTHS NOW, I ABSOLUTELY BELIEVE THE UNITED STATES ECONOMY IS GOING TO BE RED HOT IN 2017, AND THIS IDEA OF “RATES GOING UP NICE AND SLOW” IS GOING TO END UP HAVING BEEN TOTALLY IN ERROR.
I CONTINUE TO RECOMMEND BUYING PUTS IN EURODOLLARS…I STILL TURN ON THIS MACHINE EVERY MORNING EXPECTING TO SEE THEM CRANK UP, FOR STARTERS, WITH AN 8-10 TICK DOWN DAY.
I am still buying June puts but I love the idea of adding to existing positions by buying the extra time here in the September contract.
Maybe I am totally misreading all the economic activity I see EVERYWHERE (roads, malls, airports, construction, housing sales, vehicle sales, etc.), and I can’t, under ANY circumstances, envision the enormous stimulus we are going to see coming out of Washington as being anything but FUEL ON THE FIRE…and I THEREFORE SIMPLY CANNOT IMAGINE THAT RATES WON’T BE GOING UP….A LOT…AND CERTAINLY CONSIDERABLY MORE THAN THE MARKETS ARE NOW INDICATING.
Give me a call if you want to talk about it (I will out of my office and unavailable until about 10:00 AM tomorrow).
All option prices in this newsletter include all fees and commissions.
The author of this piece currently trades for his own account and has a financial interest in the following derivative products mentioned within: Eurodollars