Insofar as we participate in financial markets the Fed’s message is simple: Keep dancing! The moment the relief rally took its first hard pullback last week they got on it; the Fed with its supposedly limitless monetary monetary policy and the Trump Admin with more fiscal spending plans. Pathetic what we’ve come to. But keep dancing!
And dance we shall per this morning’s futures, anyway.
This is I suppose more of a whimsical update, unlike a lot of the nuts and bolts work we do. The monetary man is exposed for the parlor tricks he performs on markets. There was a time they at least pretended to cloak this desperation in mystery, if not legitimacy. But not anymore. They want us to know about and see everything so we will dance!
I find it distasteful even as I have a good year, whatever that means at a time when the currency denominating my assets is being actively compromised. I am under no illusion that this is investing. No, it is reading the market, which now includes the Fed and Trump as part of the read. That is all we are doing, is what the market tells us to do… dance!
Who can guess when the music will stop? The only common sense way I can think of to operate is to continue to be aware of using cash as a regulator, increasing it at high risk junctures and lowering it at points as in yesterday’s continued decline (before the Fed stepped in and demanded we keep dancing). The alternative is to sit in cash at the risk they will inflate it away. At the moment I remain in elevated risk mode, but at some point we’ll confirm or negate the success of this inflationary operation and if it continues to succeed in raising cyclical asset prices that would mean more cash would be used for portfolio regulation and opportunity to deploy as opposed to any sort of legitimate position (at ZERO interest).
What this manufactured bull environment does to me, the human (as opposed to the market manager) is get me feeling good. It makes me feel smart. It makes me lust over the color green. I am aware that legions of new retail investors (ref. #607’s opening notes regarding day trading, knee jerking Robinhood investors) are feeling good too. This stuff is like crack.
Hence, risk management. But that goes both ways, which is why I covered my short on XLB yesterday before the Fed popped out and would have made me eat that short had I held it against the Fed’s wishes. Those wishes have been so clearly telegraphed to we market participants for months now.
As for the markets, maybe the major indexes will simply rise off of this pump to fill the gaps left on last Thursday’s tank job and then correct anew. Or maybe they’ll keep going.
Something similar can be said for the gold sector. Maybe the still-intact correction will end here or maybe it will not. I want to continue to use 283 as the key level to be taken out by HUI as an indicator on that.
Meanwhile, dance! If so inclined.
