You had to pick your timing to catch the gain…

Let’s talk more about the importance of contrarianism in our trading and how it applies to the markets vs. the economy in our analysis and approach.

Whether looking at the impact of unprecedented monetary easing and  ongoing 0% Fed loans, or at the record-levels of  corporate cash, both  of which will continue funding buybacks, or whether you look at the  continued policies from both/either parties all of which are intended to  expand  corporate profits and lower tax payments for the biggest  companies in the country.  None of is a good thing long term…is it at  all BEARISH for the stock markets?  These macroeconomic trends and  political forces are not good for the   broader economy and they’re  certainly not fair or good for main   street…but all these trends that  he’s talking about are WILDLY BULLISH   for the stock markets.

And as I’d noted yesterday, when you think about how the economy and stock markets can and do  unhinge  from each other for quarters, years and even nearly up to a  decade at a  time, you can more easily allow yourself to see that the  most likely outcome here is that a new, bigger, better/worse than ever  stock market bubble is coming.

The rush to label everything in this country a disaster right now is  tempting.  And with continued unemployment at levels we’ve not seen in  my lifetime and probably yours either, there’s no denying that things  aren’t great out there for the vast majority of Americans.

But that reminds me of the times back in 2007 when I’d be on TV or at  a hedge fund conference and these same people who are so bearish today  were explaining to me that the markets would be in bull market mode  because of things like housing, real estate, unemployment and banking  profits all being so strong.

See, we’ve got to be flexible.  Despite the fact that conventional  wisdom preaches “buy and hold”, the fact is that navigating these types  of huge moves in the stock markets and the economy make a huge  difference to your performance over time.   You don’t want to be a  permabear or a permabull, as I explain here in this clip from my old TV  show on Fox.  As you’ll see I was very bearish about the overall stock  market and I mock the permabears who were ignoring all the signs of the  collapse they’d been looking for throughout the run up only to miss it  as it was happening.  It was July 2008 in this clip and the markets were  near 12,200 on their way down to 6,500:

Cody on the markets from summer 2008

At one point a few weeks later as the DJIA was still above 12k, I  turned so bearish I put a 6k bottom range target on the market.  And one  of the most important traits in a great trader is the ability to follow  through on their playbook when it does indeed play out. Here’s what I  wrote when we got close to my target on the downside:

Long-time and even new readers know that I’ve been  bearish and have  taken my price range on the DJIA from 7k-9500 down to  6k-8k.  Well, the  good news is that we’re closer to the bottom part of  that trading range  right now….it’s probably time to take the other side  of the trade or at least to  stop being short/bearish.  The fact is  that some of the biggest rallies  come in bear markets.  And we’re  certainly in a bear market.

The economic news is horrible.  The earnings news is horrible.  I   wasn’t joking when I screamed last that there was absolutely no way that   GE would keep their dividend this year back when Immelt said it was   safe last month.  It wasn’t.  But that’s also now reality and that   reality is now priced into the market.

I still wouldn’t touch GE or any other company that’s become   dependent upon welfare infusions or welfare guarantees from TARP, the   Fed, Treasury, TALF, etc.

But as I proposed to Ron Paul, Peter Schiff and Judge Napolitano on   Strategy Room yesterday — we might want to consider the idea that all   these trillions of worthless dollars that the government is injecting   into the economy might actually provide some fleeting, temporary,   illusory cushion of economic activity.

The time to freak out was at DJIA 14k and the millenials on Happy   Hour were telling us that they could and should demand nap time in their   contracts because there’s so much more demand for their labor than   supply (true story!)

Don’t freak out now that we’re here near my DJIA 6k target.  If anything, catch your breath.


Cody here again in the present tense.  And see, there’s that lesson again — that the markets and the economy  were about to separate.  The economy continued to tank, unemployment  continued to rise, real estate continued to implode, and main street  continued to struggle, but the markets have nearly doubled since that  6600 bottom.  You had to pick your timing to catch the gain just as you  had to pick your timing earlier to avoid the crash.

And for what it’s worth, I still consider Google and Apple two of the  must-own winners of the app/smartphone wars just as I explained there  in that video and just as I’ve been explaining on these virtual pages  since I bought Apple at $7 a share and Google the day it came public.    That much, hasn’t changed.  And yeah, there’s something to be said for  buy-and-hold after all, huh?