Same president, same challenges
Seems the market was surprisingly surprised by Obama's win. With that uncertainty out of the way, the market's near-term course should become clearer.
Though President Barack Obama had been reported leading in virtually all the polls for some time, it would seem that the stock market had not been handicapping him as the winner, given that the market gapped aggressively lower on Wednesday in the wake of his victory. In fact, it took less than two hours for the market to shed just under 3%.
For those folks who had correctly expected this election outcome, you might have been scratching your head at how the market managed to hold together leading up to an election that was likely to result in dividend and capital-gains tax rate hikes, in addition to the fiscal cliff.
Of course, we don't know for sure that we will go over the cliff, as the can may get kicked down the road. But certainly from an economic perspective, there is not much chance that the next couple of years are going to be very different from the last four, i.e., pretty subpar from a gross-domestic-product and job-generation standpoint.
Thus, it will be up to low interest rates to keep some sort of a bid in the equity market.
I know that the hypnotized never lie
Now that the election is over and the market faces the reality of discounting those outcomes, the near-term direction of the market may be clearer and lower.
My recent strategy has been to short S&P futures, which I have done a couple of times for some brief trades. (Given that we have so many crosscurrents, holding any speculative position for very long is difficult and potentially dangerous, and not an advisable strategy for amateur investors to employ. And for the record, for me precious metals are not a speculative position, as that is a sector I have been involved in -- and expect to be involved in -- for some time.)
As regular readers know, I expect at some point the bond market will revolt, and though it is hard to say when, I was somewhat intrigued to hear on Tuesday night that a decent chunk of respondents to exit polls thought rising prices were our No. 1 problem. This is decidedly not what one would expect in the midst of a supposed deflationary period.
I have noted many times that declining prices in certain asset classes (such as real estate, which has stabilized for various price points and locales) is not deflation, so there is no point in rehashing all of that. And in the meantime, now that we have gotten our election out of the way, we can turn our attention to what the new leadership in China looks like, and what sort of stimulus programs its new leaders might have up their sleeves.
And from our à la carte menu, Apple turnover surprise
Speaking of tricks up one's sleeve, I am probably going to shock a few folks, but I decided to buy some near-dated Apple (AAPL) calls early this week (even though, as I said in a recent column, I think Apple's stock price has most likely peaked) after talking to Fred Hickey and reading his newsletter last weekend. (As an aside, if you have not subscribed to The High-Tech Strategist, I cannot recommend it more highly.)
As anyone who has read Hickey's most recent report knows, it is very likely that Apple will have an extremely strong quarter, yet, meanwhile, the stock has been in the penalty box. Thus, this is a bit of a contrary trade, and again, it is not a recommended course for most individual investors. But it will give me a bit of exposure to Apple's upside if the market decides it wants to rally in the wake of the election. The reason I chose to buy the calls, which expire before this column will be posted, is that I can limit my risk to a few dollars while Apple itself can swing wildly.
While it is very important to have conviction in your investment strategies, it is sometimes even more important to be flexible in your thinking. This trade on my part is certainly an example of that, as well as being contrary, given the recent performance of Apple's stock price.
S&P does not support this message
I was curious to see how the 1,400 level would hold on the Standard & Poor's 500 Index ($INX) following the election, as that appeared to be a floor recently. But the first time the Spooz (S&P futures market) traded down to that level during Wednesday's session, it punched through it to 1,385 before bouncing. Meanwhile, the chart of the Nasdaq ($COMPX) looks even worse, as that index is now not only below its 200-day moving average, but gapped through it on Wednesday.
This sort of action is precisely the reason I was willing to squander only a few dollars on my Apple calls, which were basically a way to participate on the upside should the market have decided to rally in the wake of a victory for Mitt Romney.
At the time of publication, Bill Fleckenstein did not own or control shares of any company mentioned in this column.
We have reached the tipping point and there is no road back. The freeloaders feeding at the government trough now outnumber the producers who have to pay for their "entitlements".
We have sent to Washington to people who do not promote self-reliance and foster an atmosphere of prosperity as Jefferson and the founders envisioned. Instead, we have sent those who will give away cash and services creating a permanent dependency on an ever growing, ever more despotic government.
I fear for my children and my country.
The market will discipline the Obama Aminstration. He may think he can rob the rich of their wealth and give it to his supporters who are the moochers, parasites, and leeches, but he'll learn a mighty lesson that his ignorant followers will fathom some day too.
Main Street depends upon a healthy Wall Street. For the dummies here, Wall Street is more than the traders and investment bankers but also includes traditional or financial banking. They provides the sustenance (money) that American Business and Consumers depend upon to survive and thrive.
If Obama doesn't keep an eye focused on keeping Wall Street in a good frame of mind, he can expect and enormous amount of pain that will doom his next four years. Also don't forget the mid-term elections.
My view is the electorate removes the party in power when they have suffered enough pain economically. Obviously this hasn't happened yet. This economy is very fragile and wouldn't take much effort on the part of Washington to make it slip back into recession. Even if Washington is on its best behavior, I still see weak economic growth and a langushing labor market.
For me, this creates some difficult investment decisons as to a choice of places to put my money.
Homosexuals and lesbians who want to be able to get married when they are not molesting children.
Women in the northeast who want free handouts of birth control pills.
Women who want free abortions, paid for by the government.
Union workers who want government backing when their demands on management are harmful to the company operations.
Schemers who want free money from the government to support their greed.
Bankers, who want free money from the government to bail them out when their greed and incompetence causes them to financially ruin their institutions.
These people have voted into office a guy who hates the US, its history, its founders and all white people. They have voted into office a guy whose only known associates during his adult life are a racketeer, terrorists, a communists, socialists and a so called preacher who hates the US and all white people. They voted into office a guy who, in his first term, appointed tax cheats and people who totally lacked competence and experience in any field to which they were assigned.
The very sad thing is the people who voted for obama and do not fall into those categories. People who were so naive that the liberal media was able to manipulate them at will.
I have heard on several occasions that the republican loss was due to Tea Party. The media has taken every opportunity to discredit the Tea Party in the eyes of the republicans and those on the Right. I hope that no one will be taken in by this deception, created because they know the Tea Party and its agenda are good for the US and the future of the US.
At the moment Tea Party is the only hope for the United States of American.
So the Dow is going to double again then. Time to get long stocks!
DEMOCRATS AND SOCIALISTS - YOU ARE THE GREATEST!!!! THE WELFARE DEPT JUST CALLED AND SAID I GOT A RAISE!!!!!
"I seriously doubt that it was the reelection of President Obama that freaked out the markets so much as the simple fact that 1) we're stuck again with a lame duck congress situation and 2) things in Europe are getting worse not better,"
Ya, "things in Europe" magically got worse in the three days since the election!
Too far down the road to blame Bush.
Don't want to see the truth as it unfolds,
Blame Europe this time around.
Thing's that make you say H'mmmm!
Keep blaming Bush, and Obama did not make happen what he promised from his 1st campaign! No I did not vote for Obama either time, because I did not feel he could get the job done, and didn't! But this whole fiscal crises is a result of people living beyond there means. If you cannot afford it then don't buy it! I've always lived within my means! No mansion, no big flashy cars etc. Home is paid for, cars are paid for, saved for my retirement no pension. Let's put the blame where it belongs on the people who brought those big home and other item they could not afford, and then defaulted!
And 4 more years of failures and lies...
Only see the United States sinking more into debt, in the next 4 years..
There will be a compromise so that fiscal cliff the far right has been crying about won`t
happen.Rush,Hannity,O`reilly love to scare the little people that the Dems will tax you to death.
Nobody calls them on their constant lies
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ABOUT BILL FLECKENSTEIN
This column is a synopsis of Bill Fleckenstein's daily column on his website, FleckensteinCapital.com, which he's been writing on the Internet since 1996. Click here to find Fleckenstein's most recent articles.
[BRIEFING.COM] Commodities are mostly higher this morning, while the dollar index is modestly lower.
Energy is in the red, except for natural gas futures, which is adding to its 4% gain last week, largely driven by unfavorable weather conditions in the U.S. Front-month natural gas futures (Jan contract) rose as high as $1.7% to $4.18/MMBtu and is now +1.6% at $4.18/MMBtu.
Jan crude oil is currently -0.1% at $97.52/barrel.
Metals are higher this morning with gold and silver ... More
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As the devil-may-care bravado of Wall Street marches on, history warns that -- in the end -- there will be the devil to pay.
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