And That's All She Wrote

Posted: Sep 24, 2011 12:01 AM

Reading through the web and listening to various pundits on TV I know it’s just a question of time. Can’t we just get it over with?

The stock market($SPY, $ES_F, $QQQ, $DOW) has finally run out of gas and it’s time for it to meet its maker. This has been the most telegraphed, yet arduous trade. On Tuesday, I kept putting on shorts and the market kept blowing me out of my position going higher and higher.

Part of the reason is that the volatility has been so high, when a market takes off you never know how much money is chasing it. Even when you are right, you have to take so much heat that it’s just not profitable.

So why put the position on at that time?

Because after doing analysis, you form an opinion and execute it in the market. I have missed more moves in the last three years than I care to tell you about. So, you have to have the trade on to make money.

Watching the long slow death of this market has been agonizing. Back in 2009, a friend of mine who heads up research at a very big firm asked me what I thought. I told him the market was crap, but it would go up as long as the government bought it. We looked at some charts from the 1930's. While not a perfect mirror, this market reminds me of that time. We rallied in 2009, 2010, and this year the government stopped buying it.

SPDR S&P 500 Price Stock Chart

SPDR S&P 500 Price Stock Chart by YCharts

In 2008, the financial world cratered. Since then, all governments have been doing is papering it over. It’s time to have a day of reckoning, organized bankruptcies, and work outs. You can only kick the can down the road so long.

The PIIGS are finding that out as well. Why hasn’t Greece defaulted yet? Just get it over with already. What redeeming quality is there in holding all this bad debt together?

Take your lumps, break up the Euro, and let’s move on already. The opportunity cost of slowly bleeding to death is more painful than the cost of simply going bankrupt and picking up the pieces.

If you haven’t sold the market already, don’t.

You will get killed by the volatility and there is about a 1:1000 chance you will pick the bottom. If you are in cash, you might want to wet your toe a little. But the climax of the play hasn’t happened yet.

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