Monday, in a strange outburst Dallas Federal Reserve chief Richard Fisher calmed the market by calling on investors to stop acting like feral hogs. The Texan blamed the swooning stock market on those wild beasts, which his state allows to be "taken" year round with no limits. Yet, it's pretty clear this is a bad analogy. Those crossbred feral hogs seem to become more dangerous each generation as they "develop the traits needed for survival in the wild."
Wall Street babies aren't in the woods fighting for survival, just whining for easy money.
Perhaps the biggest hawk on the Fed, Fisher curiously said, "I don't want to go from Wild Turkey to cold turkey overnight."
I love the colloquialism but what the heck is he talking about? Tapering isn't stopping; it's about slowing and therein lies the big mistake of the Fed. They keep whining about the feral hogs of Wall Street but keep making them bolder and wilder. Stop playing to Wall Street and begin to play to Main Street where the $85.0 billion in monthly purchases aren't making any kind of serious impact. Please don't point to auto sales or the housing market. The former is all about subprime loans while the latter is all about deep-pocketed investors.
The risks are too high for the Fed to keep printing money. Maybe they should stop passing around the Wild turkey and go cold.
As for the market, it's going to move wildly on emotions and perception which becomes reality from time to time. But in the end fundamentals matter more than gimmicks and those that don't panic by selling stocks of great companies with organic growth, pricing power and gobbling market share are going to be richly rewarded but it's never been meant to be an easy ride. In fact, a lot of the feral hog action on the street is more Vaudevillian in nature, designed to chase out weaker investors and buy on the cheap. Controlled panic, however, is difficult to manage.
Yesterday, we got a glimpse of both uncontrolled panic and a sense that pickings were easy as the Dow bounced off a 248 point drubbing to come within sight of entering positive territory.
I wasn't surprised the rebound faded into the close. I'm not sure what turns the market around although it's oversold on a short term basis and individual names are looking amazingly attractive. But, we aren't in the game of picking bottoms but evaluating value. The cheaper these names become the bigger the upside and also more luxury of not having to be at the exact inflection point. The thing is if indeed the economy is getting better, then many companies whose shares are in freefall should benefit. There's no getting around these periods in the market.
I think all the news and hype merely masked or provided the spark for an overdue pullback. Now the market must grapple with interpreting and reinterpreting Ben Bernanke and other Fed officials. We already follow the economic calendar, investment conferences, and company shareholder meetings and wake up early to see what global markets are doing. Now we have to know when Fed officials speak, too. I admit it's a bit much. I understand it will be frustrating although a lot of investors are unrealistic about the market.
If you're an investor then remain an investor if you're a trader then trade in and out but don't be an investor when you buy only to act like a trader and take unnecessary losses on pullbacks driven largely by emotional hogs. Yes, I know the old axiom that bulls make money and bears make money but hogs get slaughtered is used to instill confidence and discipline. It's very difficult to be disciplined in this environment, especially when all the key players are being irresponsible. Essentially individual investors are caught in the crossfire of the Fed and Wall Street.
You only become a casualty when you sell stocks in companies that are doing great business.
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