And with a spin of the wheel and swing of the bat…the market indices fall, taking out the February lows with a sense of urgency. It seems that the hedge funds and institutional investors - that are now in the process of snacking on each other after devouring any remains of the retail investor – are very fast skittish in behavior, reacting quickly to any feelings of insecurity.
You see it in the way these markets fall so much more quickly than they move up. You see it in the volume that accompanies the moves down. You see see it in the action in many of the individual names.
There is a very simple psychology accompanying this behavior. It is 100% driven by the desire to survive and retain the champagne wishes and caviar dreams that come with a steady diet of 1 and 20. The management fees and incentive fees fund managers collect, that are under increased scrutinizing, especially by the very investors that come out of pocket to support the Andy Warhol paintings and expensive vacations.
With fund managers experiencing a mass exodus of funds under management in 2008 and many continuing to be under their highwater marks as a result of the blasting they suffered that year, none can afford to have anything that is perceived as irresponsible of reckless behavior. That leads to moves like today’s…where every single sector under the sun is sold relentlessly and the mice scatter, taking whatever crumbs they have left with them.
Let’s look at a couple of market indices and ETF’s from a technical perspective to see what we are facing:
*click on the charts below to enlarge them
Now let’s turn our attention to what should be viewed as a harbinger for the retail sector. Our good friends at RL (Polo Ralph Lauren) released earnings a couple days back and blamed their woes on Asia. The stock subsequently proceeded to tank on what was the heaviest volume in over one year. I am not concerned with the reasons for this move down, as much as I am the psychological implications for the retail sector, when one of its admirals…in this case RL…begins breaking down.
If anything, all of those who don’t believe in the highly cyclical nature of retail stocks as of yet, should pay attention to what RL does for the next 6-9 months for their first lesson in cyclical behavior in retail names. The stock is sitting at 77 now…and I don’t believe it will see anywhere near 90 for the rest of this year. Its downward cycle is just beginning and the risk/reward equation seems tremendous. As I tend to pass on companies that exceed a certain market cap…RL is not my cup of tea, but I will be watching it as an indicator of the massive damage to come in the rest of the retail short candidates I speak of on an almost daily basis.
And from the pews I hear, “speak on Dr. Kellegro…speak on my brother”. Speak on I will. Toyota…gone from totally sheik…to totally geek. Actually, excuse me, perhaps the company has always been totally geek, as they did invent the “I’m conscious about the environment, so I can cut you off on the freeway” Prius. I personally, have wished that the brakes on many a Prius would fail in the past, as the drivers of these vehicles seem to be cut from a shit stained cloth. Perhaps I’m generalizing a bit too much, but everyone knows what I’m speaking of. Back to Toyota…the company.
It seems that corporate greed rears its ugly head again, as details of Toyota’s lack of attention to obvious faults in their machinery become public. Corporate greed is a scary thing…it seems to be reaching its apex now, as the middle class is becoming aware of the chronic rape of their net worth by the government – aka corporations – through various promises, programs, wealth transfer schemes and a steady regimen of debt. Companies like Toyota try to sweep little things like the potential for a fatal accident under the rug, until the pressures become too much and blow up in their faces.
The system of accountability needs to undergo a dramatic shift before any of this changes. The hierarchy of values amongst corporations -aka government - needs to shift away from shareholders, investment bankers and members of the board…back to the consumer.
And then most importantly, a system needs to be developed that removes the tentacles of corporations from publicly elected officials. As of today, this has become a chronic condition of government. It has become a chronic condition of capitalism. It has essentially…and simply become a system of corruption. This system of corruption is eroding the foundation of the westernized world…and creating a completely new order that is still in the process of being shaped. There is very little we know…although many will claim to know the final result of this shift…about what the final product will look like.
What is becoming increasingly evident…is that the influence of what we can call the vanguards of capitalism has eroded. New leaders are emerging and as such, the position of countries like the United States and much of Western Europe has been compromised.
It is a tale of corruption, greed, gluttony, and contempt….the amplitude of which will slowly be discovered in the years to come.
Dr. Kellegro….day 32.