Bull. Bears. And Lemmings.

February 20, 2012

The central bank, ye demonic force for evil inhabiting the darkest corners of Ron Paul's dreams, has catalyzed another stock market rally.
The cause?
Most notably, the November announcement that central banks would jointly intervene in order to prop up the nascent global recovery.
The effect?
Since October, the market rally has been unceasing.  Bearing a strange likeness to Julia Robert's smile.  Tireless.  Present, even at odd occasions.  Beginning to less resemble a smile than an odd, omnipresent hole between her chin and nose.
Greek tragedies. Rising debt ceilings. Expanding deficits. Inflating energy prices. Endless unemployment. Echoes of war. Ceaseless political primaries. And still, this party won't stop!
Don't get me wrong.  I'm a junkie.  Hooked.  I'll take every gravity defying nickel this market can offer. Even if I'm grabbing 'em in front of a steamroller. 
And the three largest brokerage firms?  Their 50,000+ salesman cum advisors?  Nor do they care.  They're smiling and dialing.  Pitching funds and money managers like P.T. Barnum did his circus.  With gusto!
Their clients?  Ecstatic.  Having ridden the roller coaster ride of Buy and Hope for so long, they're speechless at the arrival of statements showing multiple months of steady appreciation.
Ain't no party like a west coast party
Cause a west coast party don't stop.

Of course, Coolio was a better lyricist than market technician.  And this party has recently given a number of signs portending its conclusion.
The divergence between market direction and stocks trading below their ten-day moving averages is alarming. It mean that momentum is waning.
True, markets can remain overbought for extended periods.  But when Barron's headline points to "Dow 15,000," you best stop, drop and roll.
Then, when you think the armies of appreciation are about to storm the gates in one final, abject route of the bears, one of its generals goes down.
Apple (which we own), appears to be hinting at its own bearish reversal. Euphoria has given way to exhaustion.  Even as the nattering no-littles at every financial network and publication prattle breathlessly of its future.
350?  700?  Which is it Dr. Head U.S. Equity Strategist? Do tell!
Put a sock in it. Apples going higher. But first it may go lower. And at 9% of the NASDAQ, it may bring the market down with it.  Cause when the lead dancer falls, the music quickly stops.
Moving on, one can quickly discern that indicators like the transportation index, the Baltic Dry Shipping Index, and even the price of copper--all of which typically lead certain market and economic movements--appear to be exiting the stage.
One need not be an analytical savant to see that this market has plenty of top in it. For those investors just arriving at the party, I wouldn't recommend drinking too much of the cool aid.
. . .
Finally, I've got to comment on this circular firing squad which is the GOP primary season. This endless charade of speeches, baby kissing and say-anything tomfoolery which will ultimately conclude with a beaten down GOP presidential opponent.
The far right can't stand Romney.  Though he's a former governor, entrepreneur, executive, family oriented man of faith--still not their type.
Ultimately, after he's been rode hard and put away wet, he'll get the nod.
His opponent?  The president.  Who promised to balance the budget by the end of his first term.  Who presided over an $825 billion stimulus program (according to the CBO) that did nothing. Thought he claimed it would "create or save" up to 3.5 million jobs, and that "a wave of innovation, activity and construction will be unleashed across America."
He claimed it would "ignite spending by businesses and consumers." And bring "real and lasting change for generations to come."
Three years later, Investor's Business Daily reports on the progress of the ballyhooed stimulus since February 2009:

  • * The unemployment rate is unchanged.  Still 8.3%.
  • * The number of workers unable to find a job for 27 months or longer has increased by 83%--now totaling 5.5 million.
  • * The civilian labor force has shrunk by 126,000.
  • * The percentage of adults either looking for work or working has declined by 3%--highly unusual for a recovery.
  • * Household income is down nearly 7%.
  • * The national debt has increased 41%.
  • * Next year will mark the fourth consecutive year of $1 trillion+ deficits.
  • * Companies continue to hoard cash, with little clarity of what lay ahead.

Why? Because politicians will say and do anything to get reelected. Regardless of the fact that my sons may spend much of their lives toiling to simply meet the interest payments on the national debt they've inherited.
The Congressional Budget Office recently reported that by 2022, programs like Social Security, Medicare, and Medicaid will account for more than 80 percent of mandatory spending and nearly 13% of GDP. Further, the CBO continues to use a 3% GDP forecast over the coming years. Most private analysists forecast a rate closer to 2%.  That could mean that these numbers become vastly worse.
Romney and Obama will eventually square off.  The parties will line up behind their guys.  Both men are driven, tireless and ethical.  Yet, both are quintessential politicians.  Beholden to lobbyists.  Donors.  Interest groups. Regardless of who is elected, very little will change.
Why would they? Why would one of these guys get elected through the two party system and then do what it takes to fix our structural issues and hack off half of those who put him there?
The democrats will never renegotiate our social insurance contracts. Nor do the republicans have a plan to restore fiscal sanity.  Both parties are in denial that our deficit issues are about both spending and revenues.  Not either, or.
One of these days we may wake up. Stop labeling ourselves.  Acting as pawns for one party or the other.  Stop blindly following a candidate because of party alone.
Until then, lemmings we will remain. Blindly following our parties and their candidates off the cliff.

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