WASHINGTON, September 8, 2014 – We begin another uncertain week on Wall Street today. Numbers are and aren’t what they appear to be and the international forces of violence are having a field day since the good guys’ once reliable general, the United States, has gone on a perpetual golf holiday under figurehead President Duffer Obama, leaving civilization without an effective leader.
Of course, that’s been going on since January of 2009, but move along folks, nothing to see here. Just the Republican’s Koch Brothers-funded War on Women and the wage-busting prospect of mass amnesty. Which we now promise not to talk about until after November 4.
The looming prospect of significant economic and headline risk is making it tough for bulls to sustain their current enthusiasm, particularly since the long-threatened Fed interest rate hikes are likely to begin soon—sometime before 2030, we reckon.
What we’re trying to articulate here is that it’s tough for individual investors to pick their way across this desolate, mine-filled landscape and still make a profit. We’re actually doing that successively thus far, with capital gains plus dividends totaling roughly 6%. Right, it’s not world-beating. But with three months left, a number like this could get respectable. Maybe.
Markets continue to bob and weave with institutional uncertainty, and it will remain that way this month. For example, watch for Apple [AAPL] to come up with impressive product announcements this week. And then watch Apple’s stock get slaughtered.
Meanwhile, China’s Internet giant Alibaba [proposed symbol BABA] starts its promotional IPO roadshow this week in preparation for its promised, epic new stock offering next week. But sorry…As retail investors, don’t imagine you’re going to get any. It’s a lead pipe cinch that nearly all the shares have already been allocated to the 1%, as if these already very fat cats need the explosive pop they’ll likely get when the stock opens for public trading.
In any event, BABA is likely to be the yin that offsets AAPL’s yang, so who knows where things will go next, particularly as the world grapples with the murderous politics of ISIS/ISIL and the Phoenix-like rising of Vladimir Putin’s new, Russian mafia-run Soviet Union.
It’s a mess.
Today’s trading tips
Given what we’ve discussed above, pretty much the only thing we’re doing for now is building up our hedging position in SH, the S&P 500 short ETF. This one will only make us money if the market tanks, which we expect it to do sooner or later. We generally use SH to hedge stock positions we’d rather not dump during the crunch.
Frankly, for decades, our investment strategery (hat tip to “W”) has been to climb on board the bull train when it takes off from the station, ride it as long as possible, get out of more speculative positions when the train’s boilers start losing steam pressure, and hold on for the fast journey down the cliff with stocks we still want to hold, offsetting the downside with that SH position.
The overall idea is to clean up during the bull market, and sustain minimal losses when the bears party hearty. It’s one thing that still works, even in this market. But you have to tune out the stock touts on CNBC and really listen to what the markets are saying to effectively hedge your bets.
*Cartoon by Branco, by permission via LegalInsurrection.