Cavalry trade rides again
Anytime whispers of a European rescue boost markets, take the opportunity to sell out of economically sensitive stocks.
We just keep thinking that someone will come to the rescue. We keep thinking that everything "bad" that is happening is actually already "in" the market. We keep talking about opportunities from the selling of premium assets by Credit Agricole or Paribas. We keep thinking it is business as usual and we can just go buy anything that's down.
What's so amazing is that there is no evidence that this hopeful attitude is worth anything at all, except in sporadic moments when we get a takeover -- Novellus (NVLS) -- or we get a report that confounds the short sellers -- Federal Express (FDX) numbers being the best example last week.
In fact, the strategy that has worked so well is to use every one one of these cavalry whispers to blow out of anything economically sensitive and sell anything that needs accelerating world growth. Anything.
That makes sense to me.
Sometimes it helps to visualize the moment with an individual stock. Let's choose Dow stock Alcoa (AA). While our charitable trust owns Alcoa, we are reluctant to sell it down here, yet I expect it to report a horrible quarter. People will ask, how much risk is there down here?
I think AA is going to have a horrible quarter. Miserable. I wish I could sell it, short it, and cover it in a nanosecond, but the trust doesn't really allow for that so we tell people it is going lower.
But people will try to come up with a reason to own it. The only reason it was higher in pre-market trading Monday was because it is part of the "cavalry" trade, the stock futures rising because someone "knows something."
What I am saying is that you should do the exact opposite of this. People don't think of this because they are too gripped with the agitprop of risk-on/risk-off. But that's what is going to happen.
So, check it out. The cavalry trade rides again. And the market has no memory for what happens each time: The cavalry runs into a European bond auction, people realize that Alcoa may lose money -- the estimates are ridiculously high -- and we start the hopeless trade all over again.
on your show at the beginning of 2011 you picked alcoa at $18 as the best
dow stock of the year..............now you MUST know you did this so now you say short it????
i think you do outlandish things like this to cause controversy and sell your books
and website.......you're like a minister who one day says eye for an eye and then the next sunday says turn the other cheek......WHAT A SCAM
In this market you need to be willing to dump stocks on a dime or better yet, short it when you get out.
Investing is dead!!!!!! If you want to make money in the market, then you need to be a trader willing to get in and out as many times as necessary. If you can't manage that, then you have no business in the market.
The real fools are the ones who buy and hold on Cramer's recommendations. If you need to rely on advice and guidance, please stay out of stock market sandbox and save your money.
If Jim Cramer says to do something, and people do it, then it becomes a self-fulfilling prophecy - he caused it. Why is he not required to register as an investment advisor? If he says that it's going to rain and that everyone should go out and buy an umbrella, then many umbrellas will be sold even if it doesn't rain. What he does is not just unbiased reporting, he is dispensing investment advice and he gets paid for it.
People need to understand that CNBC gets paid by advertisers who are selling financial products and that they sensationalize everything. If someone cuts a fart, they will run a special report on the social benefits of farting and then every guy & his brother that sells gas masks will be advertising on their channel.
I take this position with Cramer. I listen to his advise and then immediately do the opposite. He burned me for the last time when he recommended Chesapeake Energy at $33. Now its down to $22. He has other motives than to help the main street investor.
CNBC, as ememplified by Mr. Cramer, is reall nothing more than The Tout Network.
HE HAS ONLY ONE MOTIVE AND THAT IS TO PUMP UP WHAT HIS MASTERS
TELL HIM TO PUMP...........CHESAPEAKE IS JUST ONE AND HE HAS BEEN TOUTING IT FOR A LONG TIME.............YOU CAN MAKE BIG MONEY SHORTING HIS CRAP
Not to worry. European leaders and bankers will have a meeting. Then they will make an announcement. Then the markets will respond.
The prices go down, then buy, buy at a lower price.
it seems to be a game because it is a game,
but only the ones in the know win.
The rest of us just provide the black powder
for the whole charade to go up in smoke
with a louder wham, my dear suckers...
Copyright © 2014 Microsoft. All rights reserved.
The bank is stuck in a legal morass stemming from ill-advised acquisitions. Will CEO Brian Moynihan ever establish a new legacy?
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.