Wednesday, February 27, 2013

Bull vs Bear. Who Is Winning?

Few days back I wrote that the bull may be wounded but not dead.
Today's market action again proved my point. One day SPX down 2% and next day it is up almost another 2%! Go figure.
The fact remains that upside is limited but Ben is not ready to accept defeat so quickly and easily. And as you know, there is no easy trade. When everyone is expecting the "Top", it remains in hiding. The market will kill the early bears and suck in the late bulls. And another new month is coming with new fund allocation. Why give up all the free money?
But why every 10-15 point move up or down make such huge news? For one, the 24/7 news media is hungry for sound bites and dramatizes every small insignificant issues. But the more important thing which was point out by Josh Brown of The Reformed Broker is that, almost everyone has jumped in the options bandwagon and are playing with leverage. A 1% move has multiplier effect when combined with leverage. This is not investing. This is speculating. And speculation is anything but good for long term financial health of an individual investor.
So where do we go from here?
For one, I have avoided the urge / temptation to go short for now and have advised subscribers likewise. I am sure I will lose some of my subscribers with my constant call for caution and not having enough action. But the fact is we are making a top and direction is not clear. We have a sell signal and yet I am hesitant to take action based on the sell signal. And it is my policy that when in doubt, do not trade. I would shoot, only when all the ducks are lined up in a row. Sometimes give up short term opportunity for longer term clarity.
Folks who have been in the market long enough know that we make 80% of the profits from 20% of the trades.
Going back to the question, who is winning the battle of bull vs. bear, look the following picture for an answer:
It is the TBTF Banksters who are winning.
Yesterday Jamie Dimon told an analyst covering the bank to go F**K himself.  The following is from Reuters:

At a J.P. Morgan investor event this week Mike Mayo, an analyst at CLSA, who has been a critic of large banks and, at times, Dimon, asked if J.P. Morgan wasn't at a competitive disadvantage compared to more highly capitalized peers. (Here is a playback via Business Insider:

Mayo: I think what I hear UBS saying in the presentation is that if I'm an affluent customer I'll feel a lot better going to UBS if they have 13.5 (percent) capital ratio than another big bank with a 10 percent ratio. Do you agree with that?

Dimon: You would go to UBS and not JPMorgan?

Mayo: I didn't say that. That's their argument.

Dimon: That's why I'm richer than you.

This exchange shows what is wrong in the system and Jamie Dimon personifies the arrogance of the Banksters and how they game everything.

In this environment, it is important that small investors start with "Return of Capital" not "Return on Capital" because the fat cats will steal everything otherwise. Avoid risk and everything else will follow.

That's all for tonight. Good luck trading every one.