About Me

Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Friday, August 06, 2010

Stock Market -- Back On The Sidelines

I seldom get chased out of long positions, but I did clear out my longs
(stocks + calls) yesterday and this morning. As mentioned back on
06/30, I took long positions with a scheduled six month time slot
with the SP 500 around 1018 - 1023. I sold out same with the SP
500 at 1115 - 1127. I operate with substantial leverage, but the
unlevered result was nearly +10%.

There was emotion in the sale. Not fear, not greed, but another
pressure -- aggravation. There was intellectual content to the
decision as well -- namely ignorance. The monetary and
credit liquidity indicators that command a strong position in my
thinking about the economy and the markets have so little
momentum that I simply cannot tell whether there will be enough
improvement to sustain economic recovery, much less the stock
market. As I see it, the Fed's decision to pull $200 bil. or 5%
out of the monetary base during the late spring looks like a mistake
as this bit of tightening leaves the liquidity situation precarious.
It is also interesting that the market tumbled shortly after that
little experiment in liquidity control and left Bernanke having to
say that the Fed can re-liquify as needed. Well, right now, it
looks like it might be needed.

So, I am back to short term time horizon trading of stocks and away
from longer time duration positions until it appears to me that
the Fed/ private sector are working to allow money and credit
sufficient to fund a more normal economic recovery as opposed to
the cliffhanger affair we have fallen prey to.

The tip off for me came after lunch yesterday when I found myself
hoping we would see a better employment picture today. As French
philosopher Albert Camus maintained : To hope is to despair. And,
friends, hope has its place in your lives, but not when it comes to the
markets and your money.

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