Friday, February 28, 2014

Grandma Feeds Us Chicken Soup & Roasted Turkey

Yesterday the S&P 500 walked slowly past what was once the Maginot Line. It seems that everyone was too busy eating Grandma Janet's chicken soup to worrying about all the economic fears in the world. "Don't worry, if the economy slows down I'll add a bissel more dill and chicken to the broth. If we run out of onions, its OK, I'll use leeks. Grandma Janet will make everything OK."


"Its all right, I don't know anything more about the snow and the economy than you do, but by the way, bundle up." And just like that, the markets were assured that there is a steady hand in the kitchen, ready to cook us a way out of QE and tapering if necessary. I must admit that I was impressed by Grandma Janet Yellin.

So now the averages appear to be all in gear having barely broken through their highs. It was not an explosive rally. Rather it was just enough to make it through the day after a big meal. And we all know the basic rule, don't fight grandma, er the Fed.

But now that we trust grandma to do her culinary magic, do we trust the economy? Sure there was plenty of  tryptophan  in that turkey to make us sleepy and complacent. But what about a few days from now? What about what unfolds with the economy irrespective of Grandma?

My strategy is to play a little bit longer, but not chase extended stocks. If I see stocks that break out of decent bases I will play. But the individual stocks will have to pull me in one by one.  And I still intend to stay nimble by being ready to hit the exits at any second. After all, the market is overbought and Grandma admitted that she does not yet know whether the snow has anything significant to do with the recent economic weakening. We still have to wait and see how the economy plays out. And this morning's weak pre snowstorms GDP adjustment augers poorly for the economy.

In short, it is not time to fight the tape or the Fed, but it still is time to play small and fast. There are still plenty of unknowns about the economy and whether it will be OK despite whatever the Fed does. I will play a little, but I want to see how yesterday follows through. I want to make certain that Grandma is not boxed into a corner. Lets see how the leftovers taste.

BIG Capital Advisors and Seaview Partners are not responsible for your investment decisions. We believe very strongly in our opinions, but you must perform your own due diligence in making your investment decisions.
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