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Guest Post: Yves On Drag Racing To The Top
Submitted by Yves Lamoureux, Investment Advisor, Blackmont Capital
There is no doubt that investors are feeling quite exhilarated from the recent wave up. The 1966 cartoon titled “Out and Out Rout” featuring none other than Wile E. Coyote and the Roadrunner comes to mind when comparing the recent drag racing to the top. Investors (gamblers) are chasing the absolute dream of higher returns in the same way that the coyote is addicted to catching the bird.
Fast market action stimulates quick decisions. Are they well planned or is risk thrown at the wind?
Take a step back and study the recent evolution of markets. It becomes clear that a combined bond +currency +commodity +stock index has peaked since early June. The fundamental weakness is appearing under the surface for those who only watch the major stock indices. Stocks will always be the last segment to follow. Bonds and currency markets are a lot more sensitive to change. We see contraction in broad monetary aggregates after a few months of bouncing around.
Banks have cut back on their loan book in the second quarter. Bank credit is contracting even more for the third quarter as shown in weekly data. Transportation indices such as the American Trucking Association, Baltic dry etc are also pointing south again. Consumer surveys show the general anxiety of employment losses and tight credit.
In his pursuit of the Roadrunner, the obsessed coyote is at the wheel of a dragster. After a few passes on the desert roads, they venture up a mountain. Drag racing to the top, the smart bird stops and let the roaring Wile E continue on a rocket launch off the top of the mountain and into free space.
Laws of gravity still applies, don’t be a Wile E. Coyote. ...
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Amen.
kim jong loves roadrunner cartoons.
To quote the great GG: "Bud, do you know why fund managers can't beat the S&P? Because they're sheep."
Like it has been for the past year and a half, a slow motion train wreck that you know is coming but you can't do anything about it except sit on your cash.
Another movie analogy from Planes, Trains and Automobiles:
"You're going the wrong way; you're going to kill somebody!!!"
"Ha, listen to them, how do they know where we're going?"
Wile E. Coyote bought a lot of things from Acme. He never could get them to work right.
Jobs numbers dreadful,
Earnings falling
Market soars ever higher
It is no longer about fundamentals, techincals, historical trends, or market behavior. It is all about perception. As long as the .gov needs the positive perception, the perception that all is good in the world of 401K land....then they will do whatever it takes to get us there. The .gov believes the end result justifies the means. They do not care how it is manipulated, as long as it is manipulated UP.
The house cards is about to fall. Every deck of cards has a joker, ours is named Ben Bernanke.
Bah, it'll never fall. I give up. It's been months since stocks and reality were on speaking terms.
Banks here might quit lending but in May when things looked set to drop the ECB stepped in and now the Chinese are 'lending' their support.
Best advice on this website came last week: Stop Trading.
I guess no one saw Yves' Bloomberg TV appearance pounding the table on financials, calling BAC at "an improtant low" @ $40
http://www.clipsyndicate.com/video/play/489264