Watch this video of Neil Cavuto talking about and interviewing one hell of a courageous woman!
We have studied every bull and bear market since the stone age. We have seen most everything. But we have never experienced the printing of trillions while rates stay at 0% forever. Leave no doubt about the firepower the Fed continues to have. Every time one thinks their firepower is diminished, it shows up again…and this time…a 700 Dow point frenzy off of important moving averages. We expected a move into the end of year…but 700 points should happen over a 3 month period…not 2 days. It just tells you how much hot money and itchy fingers are out there.
Enjoy the weekend. Need a nap. Oh yeah…my Knicks are now 5-23.
Leave no doubt, the end of the year combined with a Fed that will never ever ever raise rates…and we get juiced off support for many major indices at the all-important 50 day average.
Massive sell mode has again turned into massive buy mode as the Fed teases raising of rates but never does. We were amazed to read a headline saying Fed sets the stage for rate hikes! Where? When? Ain’t happening. And due to the fact that the markets adore easy money, another ugly sell-off negated and negated easily. Add in the report this morning that the ECB is guaranteed to print in the trillions in January and the Swiss showing negative rates…and we continue to get an all-in.
We would love to give you a tutorial on how to play massive sell-offs…which abort immediately and turn back up but we haven’t found that manual yet. Just realize the same areas we have been bearish on for months…remain bearish…notwithstanding their massively oversold condition which are now leading to their oversold rallies.
Just another cronyistic politician!
Less is better!
Markets remain under distribution. Rallies are sold off on an intraday basis. The NDX was really weak on Monday. Breakouts have been failing like the NY Knicks basketball team. Loads of external negative news from around the globe. A crash in energy prices is now being seen as more negative than positive as many currencies around the globe are being wrecked. The Ruble will soon need the paddles.
There is not much to do right now except to manage positions and wait for the market to turn. One would think with extreme oversold conditions, a holiday rally/bounce will ensue. But so far…nothing doing.
We have told you for quite a while that the biggest bubble in history is the bond market. Central banks have spent trillions to keep rates down. To their credit, it has worked. But the final outcome? Remember, all bubbles eventually pop…and they pop when everyone is on one side of the trade. We are already seeing a small pop of the bubble in junk bonds as yield and price have been distorted for the past few years.
This is a warning shot on another area. We have mentioned this before but have now dug deeper. But a disclaimer first. WE DO NOT KNOW WHEN THINGS END. BUT WE WILL BE ON WATCH FOR WHEN THEY END. We are talking BIOTECH. We are not talking about the Amgens or Biogens. We are talking about the lovely investment banking community that in their infinite wisdom has brought approximately 124 BIOTECH companies public in the past 2-3 years…with that number ramping up in the past year. This by itself is no biggie but digging deeper is a biggie. But first: Back in 98-99, as the bull matured, investment banks hurriedly brought a ton of internet names public. Many of them were suspect. Many were money losers. Some had no sales. They were able to bring these suspect companies public because the sector was hot and the public bought it. Remember, if there is demand, it will be supplied. Some of these companies doubled on the open and went up 5 and 10-fold. Of course, we know the final outcome. When things ultimately turn, the curtains come down. Many of those names are either gone or trading for pennies.
Fast forward to today. The hottest sector is the Biotechs. Many IPOs are coming public at $15…$25…and so on. The common denominator is most are opening strong. Some are doubling…some are tripling…some are even up more than that. But…ok, let’s capitalize it…BUT there is one huge issue. MOST OF THESE IPOs HAVE NO SALES. We did not say no earnings. We said NO SALES. A handful have a small amount of sales. All have massive losses. A quick glance of the total market cap of all these names is approximately $55-60 billion. Yes…$55-60 billion dollars of market cap with hardly any sales and a ton of losses.
We have no clue when the music stops. We just know that from the study of history of the markets, the music will eventually stop…and when it does, it will not be pretty. We are not telling you to buy, sell or hold. In fact, they can continue higher and we may just see a few buyouts. Yes…buyouts of companies with no sales is also a characteristic of bubbles. This is just a word to the wise as fear and greed look and act the same in every bull and bear market. Bubbles suck you in and then spit you out. Do not be the last one in. For now, the music is still playing.
As far as the markets, they are deteriorating more and more. We continue to scratch our head at the outlier move in energy and currencies around the globe. These are not normal moves and worry the central banks-induced markets from around the globe are now seeing blowback of silly policy. We are not sure this is good news at the end of the day. But short term, markets are becoming beyond oversold as we head into the Fed meeting and the supposed holiday bias. Yippee!