High Flying Stock Market is Scaring some Big Names
Good afternoon, this is James Cordier of OptionSellers.com, with a market update for August 11th. This past weekend, I was reading the Barron’s newspaper and came across a really interesting article. The article was named Billionaire Bears Club, and, as the name suggests, just that. It was talking to several of the very well known traders over the years that have amassed great fortunes by calling the market correctly. As the name suggests, you know what they were thinking. They were thinking to sell stocks and that we were about to go into a bear market. But what gives?
Over the last few weeks the stock market, both S&P and Dow Jones, continues to make new all-time highs, yet all this bearishness from some people that should actually know which direction the stock market will be traveling. What’s so interesting right now is something called helicopter money is probably being the rationale for the market going up. Of course, all throughout the world, we have negative interest rates. Here in the United States we have practically flat interest rates.
Certainly, what that does is it pushes investors into buying stocks, something that they probably wouldn’t be normally doing. They would love to have some of their money and interest bearing fixed income, and, of course, that’s not available. Of course in Europe, putting your money in the bank you lose money. That will cause a certain percentage of investors to buy something. Having the idea of getting no return for your hard earned dollars just doesn’t sit well with many investors, and why should it? Thus, the exact same rationale for why we have negative interest rates around the world is the same reasoning why billionaires around the world also think that the stock market’s a sell.
So, which one’s going to win out? It’s really interesting. Looking at stocks right now, we just concluded the 4th quarter of negative earnings in a row, something we haven’t seen in a very long time, yet stocks are making new highs. We have a GDP here in the United States of .08 for the first quarter and 1.2 for the first quarter. Supposedly, and well documented, the worst economic rebound in the United States since 1949, and yet stocks continue to rally.
I am quite sure and quite glad that I don’t have to figure out what the stock market’s going to do. Having billionaires, the most famous people, the most well-known guru’s in the world saying to sell and then having the market rally because of negative interest rates. All of this uncertainty provides a great deal of interest in buying and selling, whether it’s stocks, commodities, or something else, it creates volatility, it creates the markets to exceed, in some cases their fair value on the upside as well as the downside. Look what happened to crude oil these past 2 or 3 weeks. It went from 51 down to 39, simply on speculative selling.
This past week, we noted that fund speculators here in the United States amass the largest bear position ever in history. It’s just fantastic how traders around the world are forced to try and find return. Basically, we are helping them do that. If they sell a market too low, we’re going to sell puts. If they buy a market too high, we’re going to sell calls. In my opinion, they’re playing right into our hands. This is truly low-hanging fruit when the markets are pushed too high or pushed too low based on speculation.
Fundamentals is the name of the game. Waiting is what we get paid to do and we are going to continue to do this over the next several months. We will let stock pickers try and decide whether it’s a great sell or still a great buy. We will continue counting barrels of crude oil and bags of coffee in Brazil.
Anyone wanting more information from OptionSellers.com can visit our website. If you’re not already a client of ours, you can call Rosemary at our home office and talk about becoming one. As always, it’s great chatting with you and looking forward to doing so again in 2 weeks. Thank you.