Day of Ashes

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I’d be lying to you if I said today didn’t suck. For me, one picture pretty much captures it all: until 11 a.m. PST, my portfolio was contentedly gaining in value, enjoying the slippage of small-caps; the moment the Fed announcemnet hit, all hell broke loose, and I was stopped out of about a quarter of my positions. Absolutely zero fun.

0918-monk

 

Days like this one really, really get me down. The core question for me is: if it’s this simple for the Fed to keep assets inflated, why should they ever, ever, ever stop? Tell me that. Why not simply say that they will keep it at present levels for, say, the next five years, and they’ll evaluate it yearly afterwards.

I’m being serious about this. The market had priced in a tapering of about $15 to $20 billion per month. The tapering turned out to be $0. Every asset, with the exception of the US dollar, soared higher. Everyone’s happy (except your humble host). Why on earth would they want to even bother talking about tapering? If it’s this easy to keep everything in the economy zipping along, it sounds like they’ve figured this all out.

Of course, even the ballsiest bull declares, “we all know this will end badly some day.” But I don’t think they really believe that, deep down. I think that’s a throwaway line so that, in the unlikely event that the market ever goes down again, they can dig it up from the archives, roll the tape, and say, “SEE? I told you this would happen someday!” It’s a total CYA tactic.

The only thing I can say for my day was that it would have been worse if I had been more aggressive. I came in to the day 75% committed, and I beat a hasty retreat down to 45% committed. A lot of fantastic shorts got wrecked, such as in real estate and high-yield ETFs.

The other funny thing about today is that comments on Slope went absolutely hog wild. It is heartening to know that on a huge “up” day like this, traffic on Slope actually goes up (instead of to zero!) As bearish a reputation as this blog has, we still have a nice mix of traders, so I’m relieved it doesn’t become a ghost town when the herd is stampeding to record highs across the board.

Some I’ve spent the afternoon licking psychological wounds, but I’ll be back in the saddle tomorrow morning. At least the FOMC is behind us for a while, and we can focus on other matters. Thanks for being part of Slope, and I’ll see you in the morning.