MARKETS HATE UNCERTAINTY
It’s no surprise the markets are taking it on the chin this morning considering the incredible uncertainty out there. If you recall the 4th quarter of last year (feels like a lifetime ago) you likely remember how GM roiled the markets for weeks. Aside from the GM news this morning there is a mountain of other uncertainties:
The Obama stimulus plan is dead in the water. It will not help. And if it does help it will not help until 2010 at the earliest. The Geithner “plan to create a bank plan” is dead on arrival. This mortgage subsidy idea applies another band-aid to a gaping wound. Eastern Europe is collapsing. The commercial mortgage market is imploding. And bank nationalization is looking like our last resort. I’m not a Cassandra. In fact, I hate being bearish, but those are the simple facts. The data is what it is. Having a biased approach in the stock market is not an intelligent approach. Collect the evidence, assess the risks and allocate capital accordingly.
It will be very hard for the market to put together any sort of sustainable rally until the above data points are resolved. We have “fat tails” ladies and gentleman. And that means the uncertainties/risks are abnormally high. I was looking to dip a toe in the water at the 7,500 level (the 2002 bear low, the 2008 low & the 50% retracement level of the entire 1980-2000 bull), but the uncertainties mentioned above might be too overwhelming for this market to overcome. We’ll assess the data as it comes in….
