MARKET COMMENT
Dave Fry, ETF Digest, March 5, 2009
The better question, “Where is John Galt?” As the world lurches left to a collectivist mode it’s natural for reactionaries (like me?) to pine for the hero from Ayn Rand’s Atlas Shrugged. Yeppers, and I’m feelin’ that reactionary nostalgia now so that sums up my sentiment.
To the markets we go.
Mr. Market gave; Mr. Market hath taken away, and repeat. He’s been doin’ more of the latter lately that’s for sure. It’s a steady slow motion crash period. The DJIA, the window dressing for the tourists market, is down 25% for 2009. Add to this last year’s rout and we’re, lemme see, carry the one, take away two…oh yeah, that’s a nifty 38% loss since the election and another 100% give or take a rounding error from the start of 2008. Yeah, that’s a crash alright.
So we dropped another 4% in most indexes today. Stars of the show were Citigroup dropping to pennies for much of the day and GM…well, it’s just trading like a bankrupt stock should. And bonds? They’re trading like pork bellies in a bad weather market.
Volume was about average and breadth both sucked and blowed. Again, check out the new 52 week lows.
Our man in Geneva, David Hurwitz, (let’s give that man a hand!), fellow subscriber, blog reader and all around groove gives us his take on volume and breadth. Thanks Dave! And, it looks like a negative 10/90 day.
There were even some comments today that people should borrow against the cash value of their insurance policies while they still can as there might be troubles in insurance land. Further, one commentator suggested that Berkshire Hathaway might go belly up. Egad! Say it isn’t so! Nevertheless, the Oracle of Omaha made a stupid bet by selling those put options which is currently costing him billions.
Financial advisors, brokers, financial planners and many seasoned money managers are in shock. I get this from the increase in our traffic and the amount of “help me” email messages. Additionally, many investors are anxious to find ways to rehab their portfolios. There is no magic elixir for what ails most portfolios. I’ve been a little despondent we haven’t been able to make as much money on the short side as seems available with hindsight. But, oversold conditions have kept us on the sidelines for awhile now. A healthy dose of cash in this environment isn’t a bad strategy now since things can turn on a dime.
The goals of individual investors have changed. What was first “make me money” has reversed to “protect my wealth” as a first priority. I get that. 
Mutual funds have little cash to employ since redemptions are high. The same is true for hedge funds that are fighting the same redemption battle. Not many investors are calling their brokers to fund their IRA or 401k plans. If they are calling their brokers it might be an unpleasant conversation. Therefore the ammo to launch a major rally isn’t there. The only folks with cash to invest are a few hedge funds and WS trading desks courtesy of the tax payers.
The new administration in Washington seems lost and not inspiring much confidence outside of lobbyists who are trolling for favors. It makes me think of Ayn Rand philosophy. But, when we search for a John Galt or Dagny Taggart there is none to be found in modern American industry or anywhere else for that matter.
Tomorrow is the unemployment report and no one expects anything good from it. So, even a poor report may be met with a shrug.
Have a great weekend!
Disclaimer: Among other issues the ETF Digest maintains positions in: IEF, TLT, FXE and GLD.
