Once again CNBC has gone too far!
The futures were doing very well, up almost 1% until CNBC put together the tag-team guest spot of Mohamed El-Erian, the notorious bond pusher from Pimpco and “Doctor Doom” himself – Nouriel Roubini in a classic bear and bigger bear face-off that was timed right into the EU’s lunch hour. Roubini’s new book is called “Crisis Economics” and there’s nothing like a crisis to chase people into the loving arms of PIMCO, where El-Erian gets the fees. It’s odd that there’s not even a simple disclosure statement from El-Erian to guide viewers like: “You know, I do well when the market does bad.”
This same gloom and doom tag-team was touring America in September of 2008 (see “Roubini, El-Erian – ‘Things are Getting Worse‘“) and we’re up about 20% since then but, to be fair, things did get worse first. The boys teamed up again this February (12th) and their predicition of an additonal 20% drop off the February lows (also brought to you by the fear-mongers at CNBC) was completely wrong at the time but the boys dusted themselves off and took this show on the road again as noted in this May 28th article pairing the two’s depressing outlook.
Things were getting better yesterday until Moody’s (the company Buffett owns a large stake in but has nothing to do with according to his testimony) downgraded Greece in the afternoon – something that was not at all unexpected but was treated as market-moving information on a slow news day. Does CNBC push doom and gloom for ratings or are they trying to help their bosses at GE water down the financial regulation bill by making it seem like the average investor is against it or are they just trying to keep Cramer and the Fast Money team from looking clueless? This is why we used to have LAWS that kept our news sources “fair and balanced“ - the moment a news provider takes a side with one of their high profile shows or personalities – they then have a vested interest in MAKING the prediction come true – how can that not color their future editorial positions?
As I said last week, Dr. Doom doesn’t have to be in on a cospiracy – He’s Doctor Doom! The media loves him because he is predictable tool and he is happy to perform his little act on command like a one-trick pony because that one trick has gained him fame, fortune and, apparently, women – something few modern economists have ever achieved… As Paul Simon says:
He’s a one trick pony
One trick is all that horse can do
He does one trick only
It’s the principal source of his revenueHe’s a one trick pony
He either fails or he succeeds
He gives his testimony
Then he relaxes in the weeds
He’s got one trick to last a lifetime
But that’s all a pony needs
We had a different theme song in mind yesterday as I cautioned we were very likely to be rejected by our bounce levels on the first attempt and that it would be a “Take the Money and Run” day for our short-term bullish positions. Those levels, which I’ve been posting for a month, are Dow 10,250, S&P 1,100, Nas 2,260, NYSE 6,820 and Russell 666. Yesterday’s highs were Dow 10,328, S&P 1,105, Nas 2,278, NYSE 6,922 and Russell 662. The Russell was our only failed indicator but that saved us from staying bullish and, in fact, we actually flipped bearish at 10:36, when I said to Members “I’m for taking the downside hedges here, naked on DIA mattress play (Sept $105 puts, now $6 and good for a new entry) and I also like the TZA $6 calls at .70.” Of course, it was only day-bearish – we killed those TZA calls already after getting a very nice sell-off thanks to Moody’s.
Just because you are generally bullish does not mean you can’t take advantage of bearish moves when they present themselves. As Pharmboy pointed out, we are in a string of about 29 out of 30 days in which the Dow moves more than 100 points in a day. In a day! Maybe I’m too old but we used to call that an active MONTH! My conclusion at the end of trading yesterday was: “On the whole, I think that was a gap-fill and a healthy pullback but they sure did make it ugly-looking!“ Nonetheless, we did put on our TZA disaster hedge (pays 900% if the Russell drops about 20%) as planned on our test of Dow 10,250 and now we can relax again as we are very well-covered to the downside with cheap insurance (we elected to be naked bullish last week, rather than buy expensive insurance).
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