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Why Wait For The Shoe To Hit The Floor? The Case For Selling Now
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
Waiting to sell is akin to ignoring the smoke and flames in the crowded theater and hesitating until somebody yells "fire!" to rush for the now-jammed exit.
The stock market is supposed to be a discounting mechanism that anticipates and prices in developments six months out. This discounting mechanism has been broken for so long that many participants seem to have forgotten how to do anything but buy the dips, the Pavlovian response to any decline in stocks that has been rewarded with a food pellet for the past five years.
If the shoe has been dropped, why wait until it hits the floor to sell? But incredibly, that is the overwhelming bias, even after the relatively modest decline of the past week.
Even though the Federal Reserve has made it abundantly clear that it is ending its quantitative easing (QE) bond and mortgage buying program (the Fed has already slashed it from $85 billion a month to $25 billion/month), punters are anticipating a decline in October: in other words, they expect market participants to wait until the shoe hits the floor--i.e. the Fed announces the end of QE--before they dump equities.
Where is the discounting mechanism in this? Since the Fed has announced the end of QE bond purchases, and backed that up by reducing QE by 70%, what sense does it make to wait until the announcement to sell?
Waiting to sell is akin to ignoring the smoke and flames in the crowded theater and hesitating until somebody yells "fire!" to rush for the now-jammed exit. If you want to get trampled to death, this is the optimal strategy. If not, it makes no sense.
The other big news is the unexpected rise in labor costs. The basic narrative here is: the Fed has a free hand in keeping interest rates low and spewing free money for financiers because inflation is (officially) tame, and the lousy job market has strangled wage inflation.
The rise in total labor costs (labor overhead and wages/salaries) throws a wrench into that narrative. As total labor costs (healthcare, pensions, taxes, etc. as well as wages) rise, companies will have to raise prices. (They've already reduced the quality and quantity of goods per package to the point that consumers can't help but notice.)
And voila, inflation's fearful form emerges from the murky swamp of officially sanctioned "low inflation forever." This means the Fed will have to allow interest rates to rise, lest a host of other unintended consequences wreak havoc on what's left of the legitimate economy.
What sense does it make to wait for the inevitable announcement that the Fed funds rate is ticking up? Why sit in your chair buying the dip while the smoke and flames spread, waiting until someone yells "fire" before heading for the exit?
Just as a refresher about how much air there is between the classic technical support of the 200-week moving average and the current discounting mechanism is broken heights:
The theater is filling with smoke; do you really want to wait until the crowd rushes for the blocked exits to sell? Why not actually use the discounting mechanism and sell now?
Sadly, there won't be much oxygen left for the buy the dip true believers who remain in their seats, mechanically hitting the "buy" button.
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http://www.theonion.com/articles/biden-gets-grow-light-delivered-to-whit...
CS, why don't you sell and leave us the fuck alone.
Wrong for 6 years!
ot...but seinfeld is comming on again shortly...stay tuned to ncpt......
the Fed has announced the end of QE bond purchases, and backed that up by reducing QE by 70%
I don't think so, Tim.
There's likely 10 more percent on the downside coming boys, protect yourselves. Lots of bullishness here but yesterday wasn't just a one-off that will be forgotten by next week. Today doesn't mean shit.
Wishful thinking. Sadly, theres still a lot of people just waiting for a pullback to jump in thinking they missed the run. Today shows the BTFD crowd is there to keep this bitch from rolling over.
I think the old saying is "waitng for the OTHER shoe to drop." The shoes are coming as thick and fast as falling Malaysian airliners right now. (Too soon?) Meanwhile enjoy this blast from the past shoe video:
https://www.youtube.com/watch?v=VFX-dKpcDz8
omg that's awesome
sell everything
short everything
Hey look, almost green.
It's a miracle!
(yesterdays loss) "Up and disappeared like a fart in the wind". Shawshank
The PPT finally got off the colf course...
Wake me up to sell on Tuesday's close.
Oh snap
Hey Charles, has it ever occured to you that the "market" doesn't believe the fed? It's like the wholesaler who came into the office today presenting an annuity based on a rising rate environment. He didn't take it too kindly when I started laughing. I did enjoy the free lunch though.
That's classic. Oh yes, go ahead raise rates, I dare you...
If an annuity guy told you that he is a thief I was one of the honest and I retired could not lie for a living beware of the blue surfed salesman
Stocks will fall independent of what rates do. Rate imo will actually rally perhaps to one big last blow off level as stocks crater
Why? Because in general, I already sold the majority of things I needed/wanted to. Back in the planning stage with more dry powder.
Bingo. If you're not ready for the collapse, when the shoe falls, it will be right on your dick. Or tit. No need to sexist. Sheeple of all kinds are gonna be fuuuuuuucked.
The banks will not push down prices through their electronic specialist and market maker system until they are good and ready to pull the trigger.
I do not believe that calling for public selling will make one bit of difference. The volume is too low.
Why do they have black pools? It is so that buying and selling of large volumes does not affect their managed price and overwhelm the price control computer programs.
Dow about to erase a hundred plus loss..
what selling u talkin bout Willis?
fucking joke.
If it is not in your pocket, it will soon belong to someone else.
Two corrections:
1) When the music is playing, you gotta dance.
2) Buy the dip has been rewarded with cocaine and hookers, not food pellets.
that discounting mechanism bullshit was never true. even after the fed raised rates to 5.25% last time the market still didn't sell off for months. not until oil hit $140. Same thing in 2000. The market sez "SHOW ME BITCHEZ". I don't blame them. It is zirp 4evah and everyone knows it. The fed is a bunch of lying cocksuckers. QE will be restarted within 6 months of the tapering end. selling assets is a line they use to fool the rubes. not. gonna. happen.
And one day it won't work. The reason will come out of nowhere and all the BTFD'ers will be slaughtered, because they have no way(or interest in)of differentiating between another dip and the big one.
And this is how, once again, the sheep will be sheared.
it would be nice if you were right for everyone's long term well being but you can't deny that the current prevailing mentality out there aligns perfectly with my comment.
no shoe what a turn around today. the market will end up today and all will be forgotten on monday by Tuesday all time new highs. how much did this cost us taxpayers. un fucking believable
"Would you like some fries with your double MACD?"
its called distribution. lets see closing. your views matters less.
We haven't even broken the black trendline, and this guy has his panties all wet.
What a turd article and shit head writer. ZH needs to keep the servers running somehow, I get it.
We are setting up for a rally like 1999. Get ready to party!
Yes, currently the 2nd oldest bull in history with valuations worse than 1987 and 2007, is just getting started.....
watch
"Kill them, kill them all.................."
Yellen the Ponzi Muchkin is no different to Teflon Barry:
Teflon Barry saw that if Obozocare was fully implemented, then there would be nothing short of revolution. So, he unilaterally made changes that delayed the devastating effects until after the 2014 and 2016 elections.
The Munchkin is no different, regarding changing the goalposts. The punters are hoping that when QE is over she will continue her dovespeak of "we will keep rates at zero as long as needed." There is even the hope that she will 'taper the taper' and announce maybe 5B tapering to draw out the heroin for a few months longer (safely after November elections).
Charles keeps thinking things are going to melt down, but they will probably melt up.
I'm going to wait til I hear from Yellen on whether to sell, and maybe see what Kerry wants us to do, too.
should be a legendary 330 ramp-a-thon.
Don't know if smoke is filling. This dip could just be an overthrow of the trend line and then resume upwards.
Nope, this goose is cooked. I think the key thing for me are so many comments now on ZH saying "fuk it, buy the dip"
Monday sounds like a good day for a bloodbath.
"The time to buy is when there's blood in the streets." - Baron Rothschild
"....or when the market's at an all time high....or anytime!"
Watch for the gold price...
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/7/31_Celente_-_Terrifying_Crash_%26_Death_Of_The_Global_Ponzi_Scheme.html
News on Monday:
"Ebola contained"
"Another cease-fire in Gaza"
"Gas for land deal signed; West Ukraine permitted to join NATO"
"Obama shoots a 1-under at Pinehurst"
My money is still on Negative 10-year rate, $1200 gold (NYMEX of course), S&P 500 @ 5000, and $20.00 loaves of bread.
...Maybe I'll buy some SJB just in case.
Look for a RESET similar to 2011...QE ending because it has to, margin debt at all-time high (nobody left to buy), sheeple trained only to go long...Tons of money to be made shorting over the next couple of months because most people don't believe it will happen.
Please, allow me...FIRE!!
In other words, GTFO!
Get the fuck out!
What s**t do you use to discount future prices ? The artificial risk free interest rate set by FED. Paper Prices floating on top of real assets are the values of the real assets ?
Say ,you have a view that unemployment shall cause deflation in 6 months time and expressed it by shorting the Q, you can still sell this snake oil and its second or third derivatives in liquid markets.
In illiquid markets, you might as well masturbate in the dark. That's the dilemma of today's yield chasers, market pundits, snake oil salesmen, traders etc.
When you buy/sell something and hope that x period ahead someone will turn up to take it off you is the GAME with all its spins. Stay/Exit this GAME but just know what is the GAME and not highfalutin Risk Hedging or whatever.
What s**t do you use to discount future prices ? The artificial risk free interest rate set by FED. Paper Prices floating on top of real assets are the values of the real assets ?
Say ,you have a view that unemployment shall cause deflation in 6 months time and expressed it by shorting the Q, you can still sell this snake oil and its second or third derivatives in liquid markets.
In illiquid markets, you might as well masturbate in the dark. That's the dilemma of today's yield chasers, market pundits, snake oil salesmen, traders etc.
When you buy/sell something and hope that x period ahead someone will turn up to take it off you is the GAME with all its spins. Stay/Exit this GAME but just know what is the GAME and not highfalutin Risk Hedging or whatever.