Monday, March 03, 2014

Fourteen Years A Slave Or Better Than Gravity For This Market

It has been fourteen years since the NASDAQ Composite has been at this level.  All of the other indexes have long since passed the same relative levels, although all but the NASDAQ 100 have been struggling at their current levels.

But just when it looked like it is was safe to go back in the water, we had an overbought market susceptible to the non Black Swan Lake ballet event orchestrated in Ukraine by Vlad the Impaler . Insofar as the markets are concerned, thank your lucky stars that Gravity did not win because right now the Dow futures are down 122 points. In my opinion, it could be a lot worse. So here's the market's conflict

The market deserves to sell off given all the issues that I have discussed this year. An overbought tape, confused but mostly negative economic indicators that show a slowing economy, A Fed trying to walk a tight rope and so on. Turning into post 1989 Japan is still a risk. 

But other than that, nothing has made this market fall until now. The Russians have invaded the Crimea! Brothers Unite! The Battleship Potemkin and not Elliot Ness to the rescue

The Odessa Steps Sequence - NOT!

In my opinion, Putin is a snake and Obama is the worst foreign policy president I have ever seen. What Obama doesn't get is that there is a big difference between mistaken foreign wars and talking softly but carrying a big stick. On the other hand, as much as Putin wants to act like Stalin, he does not have the chops  or economic power to do it. Call this Russia's bullying equivalent of the Monroe Doctrine. The Russian economy is weak, their currency is going down, they are too tied up with the West to go whole hog like crazy Iran might like to do. I also think that the Ukraine has no money or army to speak of. So unless Putin is totally crazy, there will not be lots of bloodshed, unless the people in the streets start a guerrilla civil war that could suck Russia into a quagmire.

I am not underestimating Putin's ambitions or the seriousness of this situation. No Neville Chamberlain am I. Rather I do not think that Russia is capable of, or trying to, make the dominoes fall. Much like they did in Georgia, I believe that they will eventually retreat or at least not go any further. Maybe Ukraine will end up being two countries: Crimea as part of Russia to the south and a separate Ukraine to the north. Who knows? The key is that Russia is not strong enough to do much harm. Yes they also could play hardball with the EU with the gas pipeline, but Russia needs them to buy the gas too. I know that Obama is working on a list of economic sanctions that he would like to impose upon Russia and I further know that Putin and the EU have already set up a means of dialogue so that situations like this don't get too out of hand.

My point is that when the dust settles, this will be a victory for Putin if he does not over play his hand. It will be a set back for the EU and the USA. But it will not be the end of the world or a real reason for a stock market top. Hungary fell under Eisenhower and Czechoslovakia fell under Johnson. Neither event caused a bear market. The reason for a bear market may come from another much bigger international event or clear evidence that the economy is rolling over despite the Fed.

Iran and North Korea are watching Obama and getting their way. China is watching and is drooling at our defense budget cuts and our lack of a foreign policy. The black swan event may come, but this is not it in my opinion.

In the mean time, I sold my CSIQ Friday, when it failed to hold its all time high. Half a loaf is better than losing. I also cut back my MONIF a bit as the market sold down. Both stocks are very liquid and easy to get back in. I am still holding my PXD which had a great day and may even do well if oil and gas prices rise during the Ukraine crises. As for buying stocks, I will again play it by ear and wait to see how the market does after the initial gap down.

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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