Since I'm posting this on ZH, I'll mention - cough - check out my new site SocialTrade [5] - cough. Thanks. Oh, and sorry about the "kook" reference below. I know most of you are the gold-is-heading-to-$4500/ounce type. Anyway....
We live in insane times. I mean this sincerely.
The reason they don't seem insane is because we have been led here, bit by bit. We are like the proverbial frogs in the pot full of water; the temperature has been turned up very gradually, and we don't notice what a dire situation we're in.
Let's just step back and look at the facts: the entire financial world is breathlessly awaiting the words of a lifelong academic who couldn't successfully manage a Burger King. The most powerful position in the financial universe has been given to The Bearded One, and while all the chatter this week is going to focus on whose Jackson Hole is going to get reamed, the real fireworks will be on September 13th.
Take a look at the chart of the OEX, and join me on the other side of it:
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I draw these conclusions:
+ The area in the rounded rectangle was the real "buying opportunity" - - the kind that only comes along once a generation. People who gobbled up stocks in early 2009 obviously did the right thing, and they did so brilliantly (or at least luckily).
+ The successive rounds of "easing" that Ben has shoved down our throats (or up our aforementioned Jackson Holes) have been obviously losing steam. This isn't a matter of subjective interpretation; this is simply an arithmetic fact. QE1 powered stocks like mad; QE2 pushed them, but without nearly as much gusto; and the Operation Twist rally has been anemic (and, in the case of the small caps, inconsequential).
+ The red horizontal line marks we are now. We are a great deal lower than we were at the market's peak at 2007 - and allow me to stand on a rooftop and shout this - - this level has been provided only after trillions of dollars have been poured onto the market like so much gasoline on a fire. If this is the best that trillions of dollars of new debt can provide, how much more upside do you think QE3 is going to provide?
Let's look at the Dow 30 now:
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It's a similar situation; we are mashed up against the top of a channel that has been in place for many, many years, and that is ONLY with the assistance of trillions of dollars of accommodation that Ben has provided to his banker butt buddies.
What I am waiting for - - the day I live for - - is when Ben announces his next offering of Big News and the market wilts as swiftly as a college fraternity President's peninsula of masculinity when confronted with an all-nude, life-sized color photograph of Abby Joseph Cohen [8]. The promise of this day gives me the resolve to keep going.
Not that today was a bad day; on the contrary.....my portfolio was UP more than the market was UP, equities were higher virtually across the board (SPY/QQQ/IWM all in the green), I was ENTIRELY short, AND I had a 30% of my portfolio in cash! Give me a day that the market is up, I make more money than the market, and I'm entirely short, and I'm a happy guy. I can only imagine the results if this stinking sack of crap was allowed to fall by the King of the Juice.
To my eyes, the miners are a jumping-up-and-down, Holy Jesus Back Up the Truck kind of short. People only see the "obvious" when it's too late. Here's the Russell from back in 2007 and 2008. It was obvious to me that it was going to collapse.
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........and it did..........
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And afterwards everyone talked about how obvious it was. No one mentions it beforehand.
For me, looking at anything kook-oriented is even more of a screaming short. Here's the gold and silver index:
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And here is the $HUI:
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I am thus short the GDX and long GDX puts. I intend to amplify this position piece by piece if things continue to inch my way.
I'm 70% committed now in 93 different short positions, and although even God himself doesn't know what's going to happen this Friday, I am certainly hoping that evil, corrupt, sorry excuse for a man named Bernanke completely disappoints his co-conspirators so we can at least wait until 9/13 for the real decision point.
I bid you farewell, and I thank you for visiting my little corner of the fiscal blogosphere.