August 24 2009

Good Morning All,

After passing the 1000 mark on the S&P 500 early in the month, markets spent the middle part of August in a push me-pull me mode, one that ended last week when the bull side of the investment argument emerged victorious. As this letter has iterated in more than one printing, we believe that this important "benchmark" index will close above 1060 by early September or maybe, early Tuesday. The question of where to next now becomes even more important to those who have come late to this once in a multi-generation banquet. Many of these aforementioned folk, nonbelievers if you will, are still awaiting the arrival of Armageddon or worse, and are thereby holding cash. They may well be right...someday. Meanwhile it may be of greater significance to try to map out a market future rather than an economic one.

If Dave Nichols of the Fractal Report is correct, markets could rise beyond the September cutoff of 1060-1100 to reach a 1250 crescendo early in October. This would nicely coincide with my penchant for a blow off, throw-in-the-towel rally that would culminate in an October currency crisis. The stategy at hand would entail dating some of your favourite stocks as opposed to marrying them. Even though I remain positive about the next five years, markets are shaping up for a somewhat normal year with the potential for a mid to late October crash/correction. Should such a cleansing occur, it would offer both solace and opportunity to permabears on the one hand and alert bulls on the other. The third hand belongs to those who have it firmly emplaced, along with their heads, somewhere in their personal anatomy.

Commentary

The "New Colossus" is a poem by Emma Lazarus whose famous words are etched into the Statue of Liberty - you know the ones..."give us your poor, your tired, your huddled masses...". What it failed to say was give us your mean-spirited and your incredibly stupid, in order that a future America will be able to populate its airwaves with demagogues, its evangelical churches with morons and one of its political parties with the greedy and the disingenuous.

The late Bobby Kennedy was fond of saying that "20% of the people are against everything, all of the time". This homily has since taken on even greater meaning during the health care debate, or should I say rants, wherein a bunch of crazy white people are running around in support of the insurance companies that either just creamed them with unconscionable premiums or took away their coverage. One often repeated anecdote tells of the elder genius who told one town hall meeting to keep the government's hands off his MEDICARE. Crazier still was the Arizona meeting during which one bright light had an assault rifle strapped to his back, shocking the civilized world when we learned that his act was perfectly legal in that state. The first thing I listen for each morning is no news... on an attempt on the President's life.