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Monday, August 31, 2015

'Sometimes You Win, Sometimes You Lose & Sometimes.. It Rains'

The above blog header is a silly-true baseball quote from the very good film 'Bull Durham' and can apply to the stock market as well..

An interesting thing happened in the world of sports last night that made us think a lot of the stock market..

For the second time in less than two weeks, the LA Dodgers were not only shut out but had a no-hitter thrown against them.

Previously it was by a Houston Astros pitcher; last night it was a Chicago Cub.
For those who don't follow baseball this means the opposing pitcher may had walked a Dodgers batter or on of their runners may have gotten on base due to a fielding error, but overall no LA player recorded a hit.

So you would think LA must be a bad team full of terrible hitters to suffer that indignity twice..

Except you'd be mistaken..

As of today they are 72-57, in first place in the NL West and 3.5 games up on the second place SF Giants.
Baseball is a lot like the market... so much ebb and flow; up and down.

Of course the game baseball itself unlike the market is not rigged.. We'll get back to that in a moment..

In baseball, the very best teams will lose at least 60 games and the very best hitters like Ty Cobb who's the greatest ever (a .367 career average) will only find success a little more than 1 out of 3 times at the plate.

Imagine how 'successful' you'd feel if you made it to work on time or cooked a dinner that did not burn only once every three attempts.

And in baseball you can be the recipient of a no-hitter yesterday then score 18 runs off 25 hits today..
It takes time to really decipher whether the ball club is really that good, that bad or somewhere in between.

We're told we're not supposed to look at the 1,600pt drop the other week as a bad sign of things to come; merely a 'much needed' correction yet when it spiked it was treated as normalcy.

Let's crunch a few numbers so we can get a more accurate read..

Eight years ago today, August 31, 2007, stocks were near the high-mark of pre-2008 crash with a Dow close of 13,357.  The actual pre-Fed intervention High took place on Oct 7th when the Dow closed at 14,164
Now we had been in an Official recession since the start of 2007 but either the markets didn't care or it took 10 months for the sluggish economy to catch up.

Remember, this is a market that represented the state of the economy with some degree of accuracy.

On August 29, 2008 (the market was closed on the 31st), the Dow was at 11,543, a near 2,000 pt drop year to year.   Once again, this was pre-Lehman..

By October 27, it hit its 2008 low of 8,175 meaning from the 2007 high to the 2008 low, the market dropped 6,000 pts or over 40% of its value
BTW, were you ever warned?  Your stock broker perhaps?  Those douches on CNBC and in the financial section of the NY Times..  Did they give you credible info to make the best decision in 2007 with your investments?

Do you know how long it took for the market to get back to the 14,000 figure it previously held in October, '08?

It took 52 months of Federal Reserve monetary policy money pumping at the rate of $85 billion per month ($4 Trillion)  so by Feb '13 all the politicians could toast their glasses in the air.

Today its at 16,600 or thereabouts, and we're all supposed to be happy and to keep holding and buying, then hold and buy followed by more buying and holding..
We're all supposed to forget 2 weeks ago today the Dow was at 17,545, or 1,000pts more than today.

Or that a mere four months ago the Dow closed at 18,312 meaning over the dead of a supposed quiet trading summer, the market has dropped 1,700 pts approximately.

So like a Dodgers baseball team that is in 1st place yet can't even muster 1 hit vs two different ball clubs in less than two weeks, what is the market:  fundamentally strong or is this a telltale sign of things to come this fall?

In a way the answer is neither..
The market will drop into late September/early October - its what stocks historically do..

And if it drops too much or too quick or people show real concern, those plunge protection teams will step in with the politicians and the squawk boxes and seek to calm the situation..

And barring a genuine necessary drop that the Fed in ill-equipt to prevent, it will yo-yo like this forever until the Dow is at 20k then 25k and climbing and we're all working Wal-Mart wage jobs as we celebrate the recovery by buying a cake & ice creme with our employee discount.