O Fortuna

By -

This is quite a curious life I’ve chosen for myself.

Everyone reading this is, in some form or another, a trader, and everyone here takes risks. Some days are good; some are bad; some are great; some are awful. Today lands somewhere between “bad” and “awful” for me.sad

The advantage you have is that your awful days are contained within themselves. For me, it’s a little different. Running a largely bearish blog in a persistently bullish environment is psychologically challenging. It doesn’t really harm my traffic – – it’s actually pretty steady, although it definitely pops higher during those rare instances when we get a tumble – – but my readers, God bless them, are a pretty loyal bunch. It also helps that many Slopers aren’t as dogmatically bearish as yours truly, so a big up day doesn’t really matter one way or the other.

One other aspect is that I’ve got a live show that I do every day, and if I’m having a rotten day, I can’t exactly get in front of the camera and start wailing and gnashing my teeth. Good day or bad, I’ve got to keep a stiff upper lip, maintain composure, and be professional. I think I do a pretty decent job, but on days like this, it isn’t easy. The show must go on.

The particularly bad part is that, at the market’s close yesterday, I figured the tough part was over. After all, I got through the Fed minutes in one piece, and in spite of some wild swings (which, in retrospect, are barely a blip), I was pretty pleased where things wound up. But, as you well know, the real fireworks started when Bernanke opened his mouth, sending every asset on the planet skyward. Based on nothing more than Bernanke’s non-specific pledge to keep interest rates low, the markets spasmed to new lifetime highs on many indexes.

Plenty of people might ask, “hey, dummy, why not just join everyone else on the planet and go long, stay long, and kick back?” I don’t really have an answer to that, except to say that buying for the sake of being like everyone else isn’t really a basis for decision-making I can accept. I guess I’m a freak in that respect. Sometimes being a freak is good. Sometimes it’s bad. For a long while now, it’s been bad.

All the same, I try to be even-handed, particularly lately, with offering up long ideas as well as short ones. What’s troubling to me – – deeply so – – is that I have no idea why on Earth the Fed should ever, or will ever, stop this asset inflation. It’s worked magic for 4 years. Why should they end it? If they are able, with computer modeling and bond purchases, to keep assets inflating in perpetuity, why should they ever stop?

The “tapering” nonsense from a few weeks ago was, I thought, a turning point. They were finally admitting that enough was enough, and they’d have to start trimming back. But they seem to have abandoned that line of reasoning. So why will they ever stop QE at this point?

It’s a rhetorical question, of course, because we all know at some point something is going to go very, very wrong. There is no such thing as a free lunch. And this have been about 500 free lunches so far. I am rational to a fault, which is at times like this my most tragic flaw, and what’s going on around me just doesn’t make sense. But, as they saying goes, you can’t argue with success. What the Fed has done has achieved its goals, consequences be damned. The “purge” hasn’t happened, and even someone like me would be hard-pressed to offer up any reason why it would happen at any point.

So as you’ve probably gathered, I don’t have any particular insights or actionable ideas with this post. I just wanted to clear my mind by way of writing. I have, understandably, lightened up – – with a 50% commitment in my portfolio now (the rest in cash), and I am in watching and waiting mode. With so many indexes and stocks at lifetime highs, it is difficult to know when the ascent will abate. We are in no man’s land, in more ways than one.