Founder & Chairman
To quote John Thomas, the Mad Hedge Fund Trader “the markets are on a knife edge”. We agree. From many different perspectives, the markets appear to be teetering on the brink. From a technical perspective as we write this, the markets are a whisker above the bottom of the trading range and it won’t take much to push them lower. There are a number of interesting stories here that could have a dramatic impact on market direction. Gold has been front and center, a story on the shiny yellow metal was on the cover of NY Times magazine. Then we have the sad story of an IMF official being charged with attempted rape, literally while in the middle of process of dealing with the intense negotiations over the fate of Greece’s fiscal problems, suddenly throwing an already tenuous situation into further jeopardy. The conspiracy theorist in me wonders how a very smart man found himself in such an unfortunate predicament at this most critical juncture in the future of the Euro-zone currency. In the end, how he got there really doesn’t matter, he’s there and that’s that.
We’ve been here before, a few times actually, where the markets were teetering on the brink, with volatility increasing, prices falling, gloomy headlines abound. Just when it looked like we were heading into the abyss, Ben Bernanke rides in on his white horse, utters a few magic words, and poof, a new extension of the bull market rages on. So pardon us for being a tad bit skeptical here, but until we’re sure Mr. Bernanke has had his vocal chords removed, it’s probably best to give the markets a little room here. My gut tells me that this time may actually be different, but we need a bit more evidence to be sure. That doesn’t mean that we don’t have some ideas for what to do right now, we have made some adjustments to our advisory portfolios that we think offer some interesting potential.
There are seasonal factors at play here, and it’s looking like the stay away in May approach may be effective again this year. From all accounts, the economy is slowing; last weeks job report which on the surface looked like a marked improvement was likely just the opposite. There were a number of anomalies that we believe artificially moved the creation of new jobs higher, while in reality either made some ridiculously optimistic assumptions about what happens to employees of companies that go out of business, or a one time massive increase in fast food related hiring at McDonalds. The next jobs report is likely to revert back to reality. None of this is particularly good for the markets. The dollar has made a nice move higher, as we wrote about recently, and commodities have fallen hard. We think that trend continues. We are already very conservative with our models, so we don’t have to take any significant actions right this minute, but rest assured, if the technical’s we’re watching get breached, we will move a pretty big chunk out of the markets.
Conditions are changing rapidly and you can count on us to keep you informed and out of harms way to the extent possible.
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