- This market is so ugly that it went into a haunted house and came out with an application.
- This market is so ugly that it has to sneak up on a mirror, to apprise its reflection.
- This market is so ugly, that when we play peek-a-boo first I peek, then I boo.
- This market is so ugly, that I named it “Link,” and its first name is “Missing.”
There, do you feel better now? Of course you do, a little humor always helps. This is not a “bloodbath” or a “rout” or the “End of Days,” as some publications and journalists describe it. I have been around here for forty-three years and there is no forthcoming Armageddon in the picture. If some want to engage in hysteria, fine, all the better for us, in the long run, as we calmly pick up the pieces and gain from their loss.
Get a grip!
The S&P 500 is now down 3.2% from the beginning of the year. Regardless of the words you see bandied about the precise word, for this move, is “Correction.” Everyone and their distant cousins have been waiting for one for eons and now, it has arrived. Please keep what is occurring in perspective.
The S&P 500 opened 2017 at 2243.50. This morning the number stands at 2607. This means that it is up 14% since that point in time. Please note, the word is “up” and not “down.” My advice is not to kept caught up in the mass hysteria and let them take the bait and let them make dumb moves.
The Dow Jones industrial average dropped 1,175.21 points, or 4.6%, to 24,345.75 on Monday, while the Standard & Poor’s tumbled 113.19 points, or 4.1%, to 2,648.94. These are steep declines, no doubt, but since we are at such lofty levels, they must be calmly put into context.
The Dow’s fall, on Monday, ranked as its 100th largest, while the S&P 500’s slide was the 127th largest in the Index’s history, in percentage terms, according to S&P and Dow Jones data. I look back at several occurrences to gain the proper viewpoint.
It was September 29, 2008, just weeks after the Lehman Brothers fiasco, when the House voted against an economic rescue plan, and the DJIA was down 6.98% while the S&P 500 plunged 8.81%. I recall vividly the one specific Black Monday, October 19, 1987, when the DJIA got hammered, down 22.61%, as the S&P 500 sank by 20.47%. The last instance was carnage, while I continue to name our present circumstances as a “Correction.”
The equity markets may correct further, no doubt, and by the look of the S&P futures, this morning, they will do just that. Some say the cause is upcoming Inflation, but I do not buy into that argument.
What the Fed missed, what most market participants missed, in my estimation, is that all of the central bank’s “Pixie Dust” money, some $21.7 trillion of it, went into the markets and not into goods, or services, or anyone’s economy. It just went into the markets. It has been the largest “Free Cash Flow” ever created and it was all done in the “cloaking rooms” of the world’s central banks.
The Fed has stopped the printing presses and the ECB has said that theirs are likely to shut-down in September and I think that is a huge part of our current “Correction.” We are about to run out of “Pixie Dust” and the markets have been depending on it since the 2008 financial debacle. This “Pixie Dust” money is remarkably like the Spice in Frank Herbert’s novel, “Dune.” He said, “He who controls the spice controls the universe.” He may have, just as well, been talking about the central bank’s “Pixie Dust” money.
The key then is to remain calm, and not to get lost in a frenzy of Fear.
I must not fear. Fear is the mind-killer. Fear is the little-death that brings total obliteration. I will face my fear. I will permit it to pass over me and through me. And when it has gone past I will turn the inner eye to see its path. Where the fear has gone there will be nothing. Only I will remain.
– Dune
For those of you that have engaged in my “Cash Flow Investing” strategy, there is less to fear, in my judgment. The money obtained last month, unless some closed-end fund changes their dividend, will be about the same for this month. If the fund prices are lower, and the yields higher, as a result, then we have the cash to take advantage of the situation without selling anything, or raiding our bank accounts. I have consistently said that this was one advantage of my strategy, and now we can use it to our gain.
The stock picking crowd is in a different position. Their issues are far greater, in my opinion, and while there is no cause for alarm, in my view, there is cause for concern. It just depends on your risk profile and the size of your margin account.
Always remember that on the flipside of a “Correction” are opportunities. The main issue is to have the cash available to exploit them. While many are focused on the downward slope, I am focused on what gems we may find, when we reach the ground, and stabilize.
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