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MLR - PMP 7/11/14

Major averages started the day down around 1% yesterday but then managed to claw their way back but still finished in the red. Volume was mixed. Problems in Portugal and a reinterpretation of the Fed's minutes as seeing the glass half empty were good reasons for the sell-off, as the market had been complacently hitting new highs over the last few weeks, thus was looking for an excuse to sell off.

The current sell off could worsen, turning into something more typical of prior corrections seen over the last year and a half where the NASDAQ Composite loses 6-9% while the S&P 500 loses 4-6%. As things stand, the NASDAQ Composite has fallen from peak levels about 2% and the S&P 500 1%, so there is further room to fall if the market feels the need to undo its complacent stance since May.

According to the minutes, the Fed is standing pat on its unusually low interest rate policy, so even though the Fed says QE is its current form of bond buying will end in October, this assumes the economic recovery is on track. And even if these manipulated government statistics on the economy shows an improving economy, the Fed still plans to keep interest rates unusually low, implying they will either continue with QE in its current form, or find some other method of keeping rates low. In other words, the Fed knows the economy isn't what the reports imply, so it knows it needs to keep rates unusually low. Bill Gross, manager of the largest bond fund in the world, thinks rates will be kept at unusually low levels at least well into 2016.

All that implies a continuation of this aging bull market, but keep in mind that bull markets tend to go a lot longer and further than the crowd expects. And this environment is unprecedented, thus "age" is just a number.

This information is provided by MoKa Investors, LLC DBA Virtue of Selfish Investing (VoSI) is issued solely for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. Information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. VoSI reports are intended to alert VoSI members to technical developments in certain securities that may or may not be actionable, only, and are not intended as recommendations. Past performance is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to VoSI, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Additional information is available upon written request. This publication is for clients of Virtue of Selfish Investing. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2024 MoKa Investors, LLC DBA Virtue of Selfish Investing. All rights reserved.
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