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Random Thoughts: Sell in May and Go Away?


The market enters a seasonally trying stretch.


On Friday we offered that while there were pockets of action -- Gold, Research in Motion (RIMM), Microsoft (MSFT) -- the overall tenor was nestled between digestive and contemplative.

Through it all, despite concerning signs of complacency, Hoofy held his head high and entered the weekend, and by extension this week, with S&P 1345 and Gold $1500 firmly underfoot. Until either of those levels is breached, market declines will continue to be viewed as healthy and natural corrections.

We understand the difference between a rally and a recovery -- but despite trillions of dollars of artificial sweetener, our Fed Chairman insists that the US economy "needs more time." What remains to be seen, of course, is whether he's talking Japanese in terms of duration.

Let's look at it another way. When you put that much juice to work in the marketplace and the economy grows at a 1.8% annual rate -- and "employment" is 8.8% (underemployment is closer to 20%) -- what does that say about the true zeal of an organic recovery?

Simple, we've transferred risk from one perception to another, and while credit markets remain firm -- and suggest that equities have viable upside -- we must remember that they're not a predictive panacea, and that stocks were down 25% before credit blinked heading into the first phase of the financial crisis.

Food for thought, which doesn't make it right. Below are some random vibes as we edge through the first fifth of our freaky week:

  • I didn't mean to sound... somber... in my opener. Perhaps I was subconsciously synthesizing that my most lucid thought since "Sell tech and financials, buy energy and metals, and open up a taco stand in Costa Rica," which was first shared in 2003, has been to ease out of New York City.

  • Today's news on Osama bin Laden -- and the attendant celebrations throughout western civilization -- crystallized, rather than dissipated, that vibe. Perhaps I'm overly acute to our collective safety as 1) it brings back haunting memories and 2) I'm expecting the arrival of my first child two weeks from tomorrow, but I wouldn't be me if I wasn't forthright.

  • Late last week, as silver again probed $50 to the upside, I let some exposure back out, which got me to a "full position" in that particular bet (as shared in real-time on the Buzz). This morning, into the nosty opening in silver, I covered that overage as I continue to trade around the position, and doing so with a learned humility and hopes that this real-time example of risk management approach adds utility at some level.

  • Are you really that surprised that the EU is going after Wall Street for the sovereign credit default swaps?

  • Isn't that par for the course in the War on Capitalism?

  • I kicked myself for not scooping some NY Times (NYT) coming out of the crisis in the mid-single digits, and it's all-of-a-sudden creeping back that way. Is this sector worth another look?

  • I've been a dollar bear for many years, with spates of bullishness mixed in as a function of time and price. I see the precarious technical position of the greenback and understand the inevitable effects of a printing press on a fiat currency, as any Old School Minyan will attest.

  • With that being said, I can't shake the sense that the dollar is poised to give the bears a run for their money (read: a counter-trend rally for the greenback) and the reaction to that effort will offer tremendous clues regarding the next big move (if/when that occurs, asset classes of all shapes and sizes should come for sale).

  • Away from the market, terrorism, societal acrimony, and the state of our union, I will offer one very simple exercise that has helped me a great deal. When brushing your teeth each day, be sure to look yourself in the eyes. If you can do that, and like what you see, you're doing great. If not, take solace in knowing that anxiety is simply the friction between where you are and where you feel you should be; and if that's the case, identify the source of stress and fix it!

  • As always, I hope this finds you well.


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