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.
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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 are screwed!
Yes “Same president” also same “BS” and failures for our country economy, jobs, and deficits.
remember the movie Titanic? see if that's not a great metaphor for AMerica today.
(obama is elected) ship hits the iceberg (the democraps, aka welfare pimps, have a majority in house/senate) it starts to take on water (bailouts begin stimulus ) ships taken on more water, this time is faster and faster sinkin' deeper and deeper (800 billion lost on failed 'green' energy bullshiit) she starts to dive deeper beneath the cold Arctic ocean (obama's re-elected) the ship breaks in 2 and she goes down taking' countless lives with her, 'nuff said, I mean that about covers it, does'n't it? depressing isn't it.
welcome to the new normal people, that's what you elected, AGAIN! damn shame is what it is, damn shame!
oh good lord lets try and guess what the politicians will do - they will try not to be unpopular so in order to do that they they have to have some sort of resolution by say march to the fiscal cliff ( remember no one really pays taxes for a 2013 until 2014). OK here comes the magic
The wars are ending 750 billion a year
The republicans will " plug loop holes " to the tune of about 100-150 billion a year and cut allot of taxes due to come back online yes they will be saviors well at least on fox news
Dividends and long term gains will be taxed a 20 instead of 15% for folks making over 250K a year yes the president will get what he wants and no one will really care in those tax brackets
We will cut about 200K in defense and social services programs it'll be hard but we are Americans we can shoulder the pain especially since it pretty much will have no impact on anyones lifestyle
The Democrats will have stuck it to the fat cats and saved the middle class and the republicans will have fixed the tax code while saving us from new taxes and if we can get growth above 3percent in 3 years we will balance the budget in 4 itll be a miracle
You should have built cash before now and be bargain shopping over the next 90 to 120 days
Then when Boehner and Obama shake hands on the grand deal and the market shoots up YOU CAN MAKE MONEY
To put it bluntly, I have paid into the system for 40 yrs. slowly saved a 401k and now for the begining of the silver yrs for me they want to raise capital gains, the only thing I have and a small amount at that so they can continue spending and borrowing rampantly. Why did we keep the same senate, house, and president in?
By the way thanks Florida for being the icing on President Obama's victory. Imagine that. A state with a republican governor and republican legislature who went out of their way to suppress the democratic vote - and they still lost. Wake up republicans. Romney wasn't the problem. I am a democrat and I would have voted for him if the republican party had allowed the real, moderate, reasonable, caring Romney to show himself. He had to make himself into a caricature of the typical right wing republican nut job so the republican crazies in that party would allow him to get the nomination. Unfortunately he couldn't get the republican monkey off his back and that is why he lost.
One of the biggest handicaps facing the republicans is their membership. It is true most republicans are not racist but unfortunately ALL racists are republican. They are imbedded in the party and until the party cuts them loose and let them go back to the kkk where they belong the party will continue to become more and more irrelevant.
the only way the left sees us succeeding is by taking from one and to give to the other. What they don't understand is, when there is nothing to take anymore. You'll have total chaos. Like Greece.
same pres ,same rhetoric, same outcome, same failure, same pres, same rhetoric, same outcome, same lies, SAME PLUS MORE OF THE SAME!
thanx 3 milion idiots for not using your most powerfull weapon, the voting one!! now look where the fckk we are, each time you look in the mirror you'll see the reason we're right back where we started, the only difference?? it's gonna get worse!! didn't think that was possible, didn't want to think it
meanwhile major firms are announcing firings/layoffs if this bastard osama was re-elected, NOT SOMETHING THE UNEMPLOYED AND DESPERATE TO GO BACK TO WORK WANT TO HEAR!!!!!
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.
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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] S&P futures vs fair value: -5.50. Nasdaq futures vs fair value: -11.80. U.S. equity futures continue holding modest losses with the S&P 500 futures down six points below fair value.
The Dollar Index began the night in the red after gaining 0.6% last week, but a steady rally off the lows has placed the index back near its flat line for the session. The dollar is currently little changed versus the yen (109.05), while the euro (1.2844) and the pound (1.6330) ... 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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