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Markets,Equities,Gold Where Do We Go, The "Oh My " Syndrome

Jul. 05, 2013 9:17 AM ETGLD, SPY
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Portfolio Strategy, Long/Short Equity, Dividend Investing, Special Situations

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INDEPENDENT Financial Adviser / Professional Investor- with over 35 years of navigating the Stock market's "fear and greed" cycles that challenge the average investor. Investment strategies that combine Theory, Practice, and Experience to produce Portfolios focused on achieving positive returns. Last year I launched my Marketplace Service, "The SAVVY Investor", and it's been well received with positive reviews. I've been part of the SA family since 2013 and correctly called the bull market for over 8+ years now. 

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I penned comments in response to another Sa contributor on my view of the markets and decided to post here . Some thoughts on the psychology of the markets , the macro outlook , where I see equities , Gold.

"the average investor is always a day late and a dollar short" - agreed , do u know why ?? Its, primarily because they look at the present situation "central banks out of control", eurozone issues, global unrest, i think you get the idea. I call this the "oh My" syndrome. While getting caught up in the noise they totally ignore what is happening around them. The "change' taking place in the economy..

Here is a concept that most cannot grasp.. Markets do not trade on absolutes, they trade on change - in this case for the better. Believe what you wish but the economy is "changing" for the better. It is very important to realize where we are coming from. Now, its Up to you if you wish to believe, but I submit the market has told us that by virtue of the gains and will continue to tell us that.

So the conclusions here are simple ; if one hasn't believed and cited the "events" as cause for disbelief then that investor hasn't participated.

Lets go back to the average investor, while he/she believes the scenario you laid out in your "more" commentary, they sit and watch , the economy doesn't "feel good" to them , so many issues oh my !…. Now when the same investors awake and sees that they are in a real "feel good" mode, sun is out, sky is blue , it will be At that moment that the markets will be in the 8th inning of the game will be looking at the next "change" . I can hear the cries, (cause i've heard them before) how can the market be going down ?, economy is humming , all seems well , how can this be …? But it will be headed down,

The thesis i suggest is counterintuitive , most investors can't grasp it.. until they see some results.. For those that can't, we will writing about them for a long time.. Why do u think most advisors get chills when the retail guy comes back in strong?? Its a decent contrarian indicator..

For the record , we are nowhere near the 8th inning, IMO far from it..

My thoughts and suggestions, Don't be an "average investor"

Most also are in the belief that the Fed has created this "illusion " That this market is all hype and fluff with nothing supporting it. Nothing could be further from the truth.. While concentrating on the "oh My" the sky is falling around us , most have either missed or ignored the improvements in corp, balance sheets and earnings. At the end of the day that is what drives the equities market. Investors that paid attention to the price action and ignored the "oh My" crowd have booked profits that are far from an illusion.

I believe the economy will limp along at the 2,5 - 3.5 % level for a while.. No surprise i guess , but i don't necessarily think that is a bad thing. I believe Markets can & will tolerate that. At present i am cautious on the market and have said so , picking spots here & there , but for the most part playing "wait & see"... More on that later...

Before anyone gets the notion that i do not take any of the pressing issues of the day seriously , I do , but put them in context.

I do that because i saw the fiscal cliff, eurozone, "euro going to par", bank runs , Spanish bonds, Italian Austerity, Cyprus, sequestration, debt ceiling , S & P downgrade , etc, etc, come & go , all the while selectively adding to positions on these events ,why ? -- because of the improving fundamentals and earnings of corporations. At some point it has to get back to earnings & profitability.

The equity market has told us that ..

Since we have not witnessed any major pullback to date I am maintaining a cautious view at this point in time but I will again state that i see no signs of a major top in place. I continue to believe that the lows that we may see on the S & P will be contained to the 1490 level (as stated back in the march - April time frame) . At the end of the day we will see Higher highs for the S & P as we move forward. I have commented here on SA , my belief is that we are in a Secular Bull market, bumps along the way, but this bull has plenty of room to run.

Of course there is always a possibility as i have mentioned earlier that we just may play out the same scenario as 1995, where the corrections were contained to the 5% level. (To date here in '13 about 6%) Whatever scenario plays itself out -- The long term trend is decidedly "up" .

In concert with my thesis on the Secular Bull market in equities is the price action of Gold. Whether one believes we are in a cyclical bear or as i suggest a "Secular Bear" market for gold, that action suggests further confirmation of the Secular bull theory for stocks..I maintain, the parabolic move in Gold now suggests a retrace back to the 1,000 level or so , (some have it going lower) and remaining in a flatline period for a while.. Just like it took many years to build that base for the big move up , it may take the same period of time to work off the excesses of that parabolic event.. It's how markets work, Gold is not immune no matter what fundamentals anyone wishes to "roll out" now.. In summary it may just take years for Gold to get back to the old highs.

IMO, any rally in Gold will be a time to trim positions or if a speculator , simply - get out.

For the more aggressive , any rally into the 1300 area may be a time to scale into a short position, (if it ever gets there 1400-1500 as a very good entry point for a short.

Full Disclosure - I am LONG numerous equity positions, No positions in Gold, but may initiate a "short" position as outlined above.

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