Fools

Markets rebound as happy central bankers do what they can to remove corrections from the world financial instruments.  The world loves up and the thoughtless fools who own stock are happy again.  Life is good and down is bad.   Fools are happy and usually own stock.

Slow Death Ahead for Buy and Hold

Heard many stories today how people bought the break and made money.  Every financial adviser telling people to stay the course and think long term.

Well, it is not the hard breaks that kill the most, it is the death by a thousand cuts for the buyers.  This hard break may be the the arrow pointing to future long term direction.

Market Loses Again

No rescue from Fed speak although I am sure they are watching.  The Fed has begun the weaning whether intentional or not so the markets are running all over their ranges to find a place where it does not hurt.  Interest rates are plummeting again and here we are.  Short covering rallies are as vicious as the breaks and there is whole bunch of potential chatter overnight that could send markets sharply higher or lower.  The 2008 pattern remains and we have actually surpassed the decline from top to bottom as we have moved -14.24% against -12.5% decline in 2008 in the May 19th to August 24 time period.

Long Luggers

Today's action was just what the long lugging, long term, reckless investor deserves.  I cannot tell you how many individuals owning stock either on their own advice or by listening to their financial advisor are guilty of planning a long term just hold and rotate long stock portfolio where years of hiding get crushed in a single quarter.  This passive approach is a from a world view sadly dependent on all being sweet,and where one believes they can continue to win by picking door number one.  That math doesn't work.   Wise up.  

AAPL has had a lousy spell here.  They have all the money in the world but so what.  They have skilled competitors and the law of substitution is starting to catch up.   Love me forever in trading and investing ends up looking awful on the P&L.      

  

Downward

The 2008 scenario continues on the pattern data set.  Market is running deep discounts currently which are a bit rich for Jackson Hole information unknowns for next week.  Liquidation however is the key today so any bid will do.   Market has had a tremendous run over the last 7 years and this correction is still a mild one.   Twenty thousand invested on the last trading day of 2014 in each one of these stocks gets you this as of 14:30 central today.

AAPL BAC GOOG GS IBM MSFT F PFE Shares 181 1118 38 103 125 431 1290 642 on20000 -806 -1856 3423 -517 -1372 -1300 -2052 1612 -2868 -1.79%

Deflation Leg Down or Fed Saves The World

Jobs numbers were in line with expectations and increased the chance of a September rate hike .

So if deflation accelerates, it will be the ugliest and cruelest of worlds.  Equity prices, certainly are the last liquid dog standing, would be vulnerable as the big dogs will be getting out.

The 2008 pattern remains intact though with less volatility .  Seven years ago we were over 10% off of our May highs and today we are around 2% off of them.  In 2008, the market began its next leg down into the second week of August and slowly sank through September and then fell apart.

If the worst of deflation can be avoided and a 4% to 5% top to bottom correction is all the S&P500 can manage, then the Fed will have saved the world.   Any equities bloat created by  zero interest rates policies will be absorbed even in a slowly climbing rate environment because equities will have provided real returns in a debt deleveraging world.

Despite the particular evils of inflation, it was always the middle classes way to participate in wealth creation.  Deleveraging deflationary economies provided few opportunities to the middle and their major asset real estate becomes unsalable.