Friday, July 11, 2014

Hardcore Bulls' Market

Only hard core bulls have made money in this market this year.  That is not just hard core stock bulls.  It also includes hard core bond bulls.  I am neither, but much closer to a bond bull than a stock bull.

I am a natural stock bear, it is what I am comfortable with.  And for a while, it cost me money because I would fight these relentless uptrends and bleed, and bleed some more.  I gave up on that this year, and focused on expressing my bearish views by going long bonds, instead of shorting.  It is the smart play in this liquidity overloaded market.

With the Fed encouraging bubbles, you have to play the long side, the short side is just too hard.  Be it long stocks or long bonds, or long both.  This may be the most dovish Fed ever, shrugging off hot CPI readings as "noise", denying that there is a stock market bubble.  The asset inflation pump is still ongoing, and with an economy that is not self-sustaining, due to demographic headwinds, and reliance on zero interest rates.

It will get interesting if the Fed let's this bubble keeping growing, nurturing it with dovish talk, along with Draghi and his new QE, and we get a full blown equity bubble.  I see that with an S&P around 2100 to 2200, at which point you will get all kinds of IPOs from junk companies coming out to cash in, increasing supply, just as the economy goes back into recession, QE be damned, and then we enter a bear market.  That is a 2015 story, so not on my radar just yet, but in the back of my mind.

Yesterday, the bulls ripped the face off the opening bears on Portugal news.  What's new.  US market doesn't care about anything but the Fed.  I have little confidence in this market, long or short.  I am looking for a dip in Treasuries in the coming weeks to get long for a longer term trade.  Until that happens, I wait.

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