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MIM3: Only Time Will Tell


The markets are the same. They never end. They go round and round and round until finally, the music stops and someone is left without a deckchair on the Titanic.

In this piece, I will attempt provide both sides of the argument that I came away with from Minyans in the Mountanis III. First, let me say that in my first time as a speaker at a Minyanville event, I found myself both humbled and honored to be included with and surrounded by so many of Wall Street's best of breed. I am hopeful that whatever commentary we provided to those in break-out sessions or just plain-old conversations around the campfire, we all learned something new. I know that I did, and for that I thank Todd, Vanessa and the entire Minyanville staff, who I am sure worked tirelessly to put on such a first class event.

Now to the fundamental picture. If I were an outsider, I would clarify the mood and commentary as a bit on the gloomy side. By the way, this includes my presentations as well! This, of course, does not make us perma-bears. I think it simply makes us realists. Each day, we are presented with much information from many sources that, as seasoned professionals, allow us to make informed decisions for both ourselves and our clients or partners. To be frank, I thought everyone made informed and thoughtful commentary throughout the entire conference. Goodness knows we tried. There were a couple of bullish folks in the crowd, but I would have to say, objectively, they were overwhelmed by pessimistic viewpoints. This leads me to the title of this article.

What do I mean by the idea of timing? It was talked about a lot at MIM. It is mentioned a lot on the Buzz. It is talked about everywhere I go when speaking with the most informed folks I can find. The timing I speak of is when the bubble of debt atop the consumer finally topples; or when the dollar finally plummets to new lows sparking gold to $5,000 an ounce, or when rates will rise dramatically due to a weak dollar or fall (my firm's view) if the economy eventually weakens? With all of this debt outstanding, what on earth keeps these bank stocks (BKX) levitated? Or the amount of Government debt, the bursted housing bubble, $71 oil, wars all over the place. Or with the volatility complex at levels associated with market tops (although I believe we did see 'single digit midget' levels for a little while last summer). Or, as the Wall Street Journal said yesterday, now corporations are joining the debt parade with both investment banking deals and share buybacks. Or the fact that I pointed out in my February 10th piece (and in my breakout sessions), that the market usually makes a mid-August high and bottoms around the 25th of October, then in the third year of a Presidential cycle, the market bottoms and runs all the way to the elections. There seems to be quite a crowd building. But is it right? Is it possible for the crowd to finally be right as opposed to their usual poor timing?

Well, my friends, there were not a lot of positives in the previous paragraph. In fact, it is downright disturbing to read the data I read each day. Actually, it makes me ill to see what is happening to the finances of our great country. For those that read my work, you know that my firm owns boatloads of Treasuries (front end mostly) and is void of corporate bonds of any kind. In stocks, I would have to classify ourselves as 'invested bears' in mostly large cap ETF's and some core mutual funds purchased years ago in large cap value. Why are we invested? Well, we are NOT market timers, but asset allocators that must measure ALL evidence before puling the trigger on a major change. I sense, anecdotally, from the common man (those not associated with the Street) that 'all is well.'

And therein lies the conundrum. We both can't be right. There ARE two sides to every trade - a winner and loser on each side. It is the '2x4' I kept referring to all week that we all, as investment professionals, must duck from each and every day. I know I have been hit by my share, and I assure you it is not fun-it is probably why I duck so often. Anyway, someone has to be right. The long-term fundamentals, anyway you slice 'em, are HORRIBLE. Period.

All I can think of is that this long-term pessimism is keeping the market levitated as Central Bank cash becomes more scarce (thank you Jeff Saut of Raymond James for that slide in your keynote speech). Short-term measures we use for sentiment are now in 'neutral' territory. These measures, mind you, take into account as many as 25 indicators simultaneously. So I 'understand' the market's willingness to go higher-maybe the long-term view is so crowded that the Piper will never come? I think not, my friends. We will eventually have to pay. I suppose we can have a range-round market or higher highs to really frustrate the bears. Maybe that is what it takes to flush out the last dime of mutual fund cash. Maybe that is what it takes to get the last of the bears to cave in.

In conclusion, I know this. The opening tune chosen at MIM3 was 'Welcome to the Show That Never Ends', one of my favorites from the old days of Emerson, Lake and Palmer (thank you Todd). The markets are the same. They never end. They go round and round and round until finally, the music stops and someone is left without a deckchair on the Titanic. In my humble opinion, that day is in front of us. Somewhere. Someplace. It is inevitable if you understand simple arithmetic and look at the debt situation and all the other negatives.

In my book, it is like a keg of dynamite with a fuse of unknown length. I am humble to say that I do not KNOW the length of the fuse, only that it exists. When it blows is anyone's guess in my book. Anyone that says they KNOW when it will happen, in my opinion, is guessing, but guessing correctly. One thing is for sure. We 'see' the dynamite and our hope is not to be in the way when that unknown length of fuse ignites runs out.

Once again, thanks to the folks at MV for including Nancy and I. We look forward to MIM4!
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Position in various Treasuries

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