Last week, I did a post called The Persistence of Memory which sought to express my (rather grim) feelings about the market we are in. The post generated 567 comments as well as a number of very positive emails. Generally speaking, I only read a tiny fraction of the comments on Slope, but I decided to go ahead and read all of the comments beneath “Persistence.”
What I saw in there slightly surprised me. Two well-known figures from another blog made a variety
of comments which, in short, characterized the entire Slope nation as misguided nitwits who cared far more about the bear “agenda” than about systematically extracting cash from the markets.
(I want to make very plain, here and now, that even in the most fantastic days of the financial crisis, when I felt I could practically print cash, I would never dream of traipsing over to someone else’s blog to tell them how misguided and foolish they were. It’s simply not my nature.)
Let me state right here that these two fellows were not trolls. Far from it. They are experienced, skilled, and, by all accounts, successful traders. I wouldn’t dare compare my results with theirs. But, I must say, the delivery of the message rubbed me the wrong way.
For one thing, the pedantic nature of the message was off-putting. In a nutshell, it was: “You guys are stupid. We used to be stupid, but we learned to be smart. Plus, we have your money now. So you guys remain willfully stupid, while we are smart and have your money. Which makes you extra stupid, you stupid-heads.”
Second, the rubbing-our-nose-in-it isn’t very nice either (e.g. “You have missed one of the great bull markets ever, and it’s never coming back. Stupid!”)
Look. I get it. I really, really get it. I’m going to be the first one to admit that there is nothing – NOTHING – that can happen at this point that can “forgive” missing the past five years. Starting today, the market could head straight to $0, and Bernanke and Yellen could televise themselves blowing each others heads off with shotguns (Jesus, would that be a marvel to behold!) and it wouldn’t let the bears off the hook. There is NO circumstance where we can say, “See? TOLD YA SO!!!” None. We were wrong. So you’re not telling us anything we don’t know already.
Indeed, plenty of bears have simply given up trying. There was this spot-on email reprinted at Minyanville which reads as follows:
I have been a longtime follower of your work, since your days at TheStreet.com, and have always admired your devotion to the things “that matter.” I have not always lived that way as much as I should but I will now have more time. You see, I consider myself “blown out” of the market and I wish to pass along to you the benefit of my experience and a warning that might hopefully prove helpful to others: You cannot fight the Fed; more importantly you cannot fight the world’s central banks acting in concert and, the practical application of all this: You Cannot Fight this Equity Market.
I have been fighting this market — on and off, but mostly “on” — since sometime after the “recovery” began when it became clear that there was not going to be any real reform and thus, no real recovery. At first, I faded the equity strength seeking to profit from what I saw as extremely misguided policies that would certainly lead to another collapse. At best, I reasoned, we were in for an extended period of malaise that would minimize my risk of loss. Later, I faded market strength hoping to “get even” from my then-substantial losses. The market gains were clearly illusory, false, manipulated, (insert your favorite ginned-up market gains adjective here) and would thus lead to even greater declines than previously anticipated. Most recently, I have faded market strength not to “get even” (out of sight by this point) but to at least make some profit on what was certain to be a significant market comeuppance. You obviously know that has not gone well.
Which brings me to my warning: You cannot short this market. Ever. Not for any reason and not on any basis. Technical levels uniformly hold and bearish patterns uniformly fail, both in markets and in individual stocks, whereas technical resistance levels to the upside NEVER hold and bullish technical patterns ALWAYS work to the upside.
Why? I don’t know for certain, but it seems to me that market gains have come to be seen as a birthright by the Wall Street elite who have been the sole beneficiaries of central bank largesse. The Too Big to Fail banks have gotten bigger than ever and Big Corporate America continues to consolidate and swallow or destroy smaller competitors. The interests of the people pulling the strings, not just in the USA but in the world, are clearly benefitted by markets that continue to go up. Further, and most importantly, they have made clear that they can keep them up. They have “won.”
You have famously said that “no one is bigger than the market.” While this may, in some sense, be true, it is unfortunately inapplicable when speaking of an entity (or entities) which are, in essence, the market itself. This, I believe, is what has occurred with the Fed and other central banks and their political and corporate allies. As long as they can freely print money, and make up new ways to hide and obfuscate the underlying (former) problems related to credit, the markets will continue to rise. And, since no one in any position of power appears to want to change that (and why would they?), they will continue to do so.
Additionally, a quick word about “priced in.” Quantitative Easing, LSAPs, or any other market liquidity measures are NEVER priced in until such measures are EXECUTED and COMPLETED. Folks can imply all they want that a market rising into a central bank decision day has priced in QE (or whatever) but the fact of the matter is that is impossible — until the central banks start actually buying or printing, that excess liquidity has not yet entered the system. As such, it is IMPOSSIBLE to price it in ahead of time. Once the CB bank-buying starts, equity markets will rally based on the ongoing influx of additional funds with nowhere else to go.
Thus, if you are inclined to invest or trade, the only rational course is to be long. Not just long, but “locked, loaded, long and leveraged.” Shorting, unless in extremely short term and targeted situations where you have close to “insider” information, is insane. You simply have to be long.
I myself will not be taking advantage of my own wisdom. Aside from the fact that I am virtually out of money (I still have a small retirement — like that’ll ever happen — pittance available for investment), I simply refuse, on moral/ethical grounds, to participate in this travesty currently being conducted — the systematic destruction of the middle class, the elevation of a wealthy elite, the punishment of savers, and the mortgaging of our future. Perhaps that is stupid of me. Perhaps it is sour grapes. I suppose, if I had more capital left, that I might be more inclined to just go long on margin, but the idea of participating in this crime against humanity just makes my guts turn.
I will close by saying this – – and this was a bit of an epiphany for me – – I would rather lose money with methods I understand and respect than make money with methods that I neither understand nor appreciate. Do I like to lose money? Hell, no. Do I want to make money? Of course! Stop the rhetorical questions!
But if I wanted my money to be “processed” by a system developed by someone else using techniques I don’t really grasp in market conditions which, for five years, have been utterly alien (and, thus, I believe, offer the aforementioned system an ephermeral advantage that may well not survive the return of a normal market), then I’d just hand my cash over to some outside money manager and sit on a beach somewhere.
But I’m a chartist, from beginning to end, and, for better or worse, I’m going to continue to focus on the techniques and methods which sing to me and seek out methods which buttress my visual affinity. I don’t care if that sounds dumb or not.
I have spent nearly ten years being honest, open, and sincere on this blog. And I tell you, in all candor, that it is my dream to have my life’s work ultimately put me in a place of understanding that has nothing to do with Janet Yellen, Ben Bernanke, CNBC, or Robert Prechter, for that matter. I want to comprehend, in some small form, the pattern and order of our lives – – – the nature of the rhythm and change around us – – – at its loftiest, the very mind of God. And this, my fellow stupid-heads, is why I keep going. It’s tough right now. But I will not quit.
