We always write to you more during bear phases as bull phases have everyone involved but bear phases have most fighting them. We are already hearing everything is just fine. We are already hearing this is no big deal. We are already hearing it is just a blip. We are already hearing the economy supports any drop. We will not disagree with any of this but we also will not agree with any of this. We will just let the market decide and as of this second, we continue to believe it is imperative that defense is your best offense.
From this morning: “Of course, the swings could be trade-able but you had better get it right. Markets are going to get volatile with back and forth wild swings. The big bounces will get many thinking everything is back to being ok.”
Look what has happened already. Down 350…back to flat and now as we write this, down 400. This is exactly what we meant by volatile with back and forth swings.
Just leave no doubt, our thoughts on the complexion changing is in gear…and possibly in a big way. Again, a 10% correction would be normal as we were up 8400 DOW points in 15 months without any correction of consequence. There does not have to be a reason for one.
The bigger issue is whether this is something more. We have told you about central bank asset bubbles for the past few years. If this is a popping of the bubble, then all bets are off on price. Again, we are not saying this is the popping of the bubble. We are saying it is in our file manager. Remember, in the past, easy money was a few rate cuts both here and around the globe. This time, we had 0% rates for 8 years here plus $4-5 trillion of printed money. Around the globe, it is even more insane as Europe and Japan are still negative with rates and still printing money. We know easy money has created bubbles in the past. What about the mother, father, sister and brother of all easy money?
We will continue to take it day by day, index by index, sector by sector. stock by stock. Our mantra remains defense is your best offense. Doesn’t mean you go out and sell everything. Doesn’t mean you sell all your funds and go into cash. You get to decide that one.
Major indices got down to their 10 week/50 day averages and bounced hard early but as you can see, have fallen back down pretty easily. At the very very least, the market proposition is now much tougher.
And we still haven’t mentioned “THE MEMO!”