Thursday, December 27, 2012

Bi-poler Market

DOW travelled almost 300 points down and up and closed in small red. And all the action intra-day was based on hope and fear. I think big boyz used the bounce to unload some of their positions. In any case hope and greed is never a good investment strategy. Whatever be the deal, taxes are going up and Govt. spending, which is the main engine of growth for now, will be reduced somewhat. At best, they can kick the can down a bit.

But that is no tonic for growth.

Don't mis-understand me, I am not suggesting to short the market. In fact I have not shorted the market since  Uncle Ben came out with his QE4 except a quick stab at silver. I think the immediate / short term opportunity is on the long side for equities and commodities and I am waiting for cycles to finally bottom and give confirmation of the up move.

The whole world in in the last stage of reflation. Japan is making the last ditch effort to de-base its currency and bring in inflation. China is again pumping in money but in a different name. Now they want to develop the rural areas. In USA, the printing press is on full swing.

Only Europe is still pushing "Austerity" but living within your means has become a dirty word and politicians cannot get re-elected based on long term structural solutions. Look at Italy. It is very likely that Bunga Bunga will come back as the leader of that country to have fun with under-age girls again. 

The result of all the money printing will have the unintended consequence of pushing the commodity prices higher. I expect crude to go higher in 2013 as well as PM sector. But timing is going to be important because with higher oil prices will come higher inflation and ultimately higher interest rates. 

Short term, SPX was down 4 days in a row and most likely tomorrow there will be a hope driven rip. It has also taken a poke at 1400 and held. If we are to see some serious selling, we might see it in New Year but cycles are about to bottom and not much time left for serious correction. And yet, some folks will book their loss in 2013 so reduce the tax liability and that may affect the market behaviour a bit. Not a big deal but still be cautious. Santa Rally has been a disappointment so far and I do not expect much in the next few days either barring occasional flutter.

Thanks for your time to read this blog post out of your busy schedule. I hope you have had a great Christmas and having a great time with your family and friends. I look forward to your feedback and comments. Should you like to join the Newsletter service from Jan. 2013, you know the drill. Happy holidays folks.