I think now that one reason for my increasingly sanguine outlook over the last some months can be represented by the piece of the chart of the S&P 500 (SPX) that you see to the left.
I’m in this stuff every day: I watch the action in various time frames; I watch it on multiple indexes, futures, commodities, currencies, bonds and I see the same thing over and over and over.
This is exactly the last two weeks action, with each candle representing the day’s open, close, high and low. White means the close was higher than the open, and red the opposite.
The largest of those red candles was last Thursday’s, a week ago. It prompted a market note from me. At the risk of seeming to be whatever distasteful thing it is to be when one quotes himself, I wrote:
When we next enter a bear phase, you’ll know it soon enough by all
accounts. You’re not going to predict it ahead of time (no one is,
except by complete accident; or, predicting so often that they
eventually have to be right), so why guess? Wait until you know…
If you hold appreciating assets, what’s materially different today, or
yesterday, or the day before, from, say, last week that would make you
wish to not hold those appreciating assets any more? Huh? Unless you
have a crystal ball that actually performs, I think you’d be hard
pressed to make the bearish case…
Personally, I took today as a great signal to go long on remaining
cash (money market) sitting on the sidelines in a 401K. I’d been
averaging into funds since transferring the account from a worthless
managing company some months ago, but with a dip like this, it’s just
too good not to buy, in my estimation. Sure, I could do better, should
the sell off continue, but even if we shave off another 3 or 5%, I’ll
still be plenty satisfied with the buy.
If you’re a perma-bear libertarian who thinks it would only be just
if the stock market and economy crashed, what difference does it make
if you’re right? Whether or not it should, in your estimation, it’s
going to do what it’s going to do — completely unpredictably to anyone
— and the ideas of Rothbard, von Mises, or anyone else, no matter how
meritorious, are going to have nothing to do with the individual value
judgments people make — increasingly worldwide — which is ultimately
the driving force of all economies; indeed, of humanity itself.
so I got lucky. In fact, one week ago today, last Friday, I saw the
vigor by which the market began moving up starting around 1 p.m. EST
(Wall Street back from lunch) and I thought at the time that "disaster"
had been averted — and notice how it closed at the high of the day
(very bullish). Then there was Monday’s indecisive price action,
followed by a perfectly common and normal retest near the lows on
Tuesday (are we really sure?) and that one actually provided a good
bull fake out because the market had tested pretty low already, was on
a strong move up (I sent out an email saying it smelled like
confirmation that the previous Thursday was the bottom), and then even
more rapidly, reversed on more "bad news" (far from an objective
judgment, there) about bond yields. I don’t know when people are going
to learn: objectively bad news is a huge natural disaster, a 9/11
event, nuclear attack, and so on. Objectively good news is a cure for
cancer, Jesus has indeed put in a Second Coming (ha ha), Michael Moore
has assumed room temperature, or against all odds, America has become a
free country. Bottom line: if you’re at all not sure whether a news
event will be interpreted as good or bad, it aint objective, which
means it’s going to be spun or discounted however it needs to be to
"explain" what has already happened. Providing "explanation" gives
professional investors, traders and speculators — and their retail
clients — the [false] impression that the event that just happened,
whatever it was, was able to be perfectly accounted for even though no
one necessarily saw it coming.
I’m tellin’ ya: it’s blind-leading-blind comedy and I see it all the time.
Markets go up because of our nature as human beings to build
and grow if there’s any possible way we can, including mortgaging our
very futures with printed money: counting on our ability to further
borrow, build, and grow our way out of it. And I have to acknowledge
the facts: maybe there will be a big day of reckoning, but I also see
that the global financial machine is nearly beyond comprehension in its
sophistication, flexibility, and power.
If someday it crashes and burns, proving finally, finally
that the perma-bears and pessimists were right all along (finally: like
a stopped century or millennium clock) then I’ll just go and dig myself
out of the rubble and get back to making money in the financial bubbles
that are sure to follow.