Grant, that by this unsparing hurricane
Green leaves with yellow mixed are torn away,
And goodly fruitage with the mother spray;
'Twere madness--wished we, therefore, to detain,
With hands stretched forth in mollified disdain,
The "trumpery" that ascends in bare display--
Bulls, pardons, relics, cowls black, white, and grey--
Upwhirled, and flying o'er the ethereal plain
Fast bound for Limbo Lake. And yet not choice
But habit rules the unreflecting herd,
And airy bonds are hardest to disown;
Hence, with the spiritual sovereignty transferred
Unto itself, the Crown assumes a voice
Of reckless mastery, hitherto unknown.
-Reflections by William Wordsworth
The market was humming along on a few tidbits of good news and with a sense that enough carnage had occurred for at least one day of reprieve. Then the habit of angst kicked in as with just about every session within the last few weeks. First, the rally stalled and lost a chunk, much like the tip of an ice cream mound in the hands of parched children who had just stampeded a Good Humor truck. Okay, so the market reached an intraday top, as some people were leaving early for religious observance. No big deal-right?
Moments later, another chunk was missing. This was followed by the precipitous slide, led by those high-flying tech names that cannot seem to catch a break. The NASDAQ was up 40 points, then 30, and up by only 10 points; by then we all knew where it was going; up by three points, seesawing back and forth then, BAM! The NASDAQ tumbled into the red, down for the day, despite strong numbers from a big bang due to several brokerage upgrades of new bellwether names, and a retail sales report that spoke to a resilient shopper, as well as a stronger economy.
The market was coming down the stretch and the 3PM sell-off was in full stride.
Why was this happening? The only explanation I could find was habit. Call it muscle memory. Habits ruled this all-too-reflecting herd, and spooked them into a hasty retreat. However, the sell-off came too soon, and there was actually time for clearer heads to see that this sell-off was completely unwarranted. That selling, simply begat selling, and each tick lower felt like a perilous plunge. When the market is on autopilot on the way up everything is groovy, but on the way down it's a pressure cooker that gets to even the best of them.
Was this the head fake of all head fakes? If so, it worked and there is no doubt that buyers were waiting for a late sell-off to buy, and they picked yesterday's sell-off. We'll see how important the session is later, but it has been my experience that a surge of last-second buying in this atmosphere full of anxiety, is a sign that smart money is picking its spots, and sensing an extremely favorable risk-reward scenario. I am inclined to agree, although we did not force the issue with buy and hold ideas.
Ugly Spending Cuts
Range: 800 miles
Ceiling: 45,000 feet
Weapon: 30 mm Gatling
Ordnance: 500 pound MK-82 and 2,000 pounds MK-84 low/high drag bombs, incendiary cluster bombs, combined effects munitions, mine dispensing munitions, AGM-63 Maverick missiles, infrared countermeasure flares, 2.75 inch rockets, illumination flares and AIM Sidewinder missiles.
Its critics (and some fans) think it is ugly, but the A-10 Thunderbolt II a.k.a. "Warthog" is a sexy 'mother' when it comes to combat and ground support. Now it is on the chopping block, because the experts are grounding 283 planes, which would save the defense department $3.7 billion over a five-year period, to make way for the more stylish F-35, still in development, to provide air support but with apparently other fancy features as well. On the one hand, we have my favorite plane of all time (the SR-71, which is a close second) versus an untested beauty queen.
I understand where cuts have to be made. And as a fan of sequestration and an advocate for much deeper cuts in the federal government, there will be military spending casualties. Of course, I think the reckless mastery of the current administration and its quest for a utopian welfare society must make the larger sacrifices, but in the end there are even some weapons that the military does not want or need. In addition, we cannot cut the size of our armed forces, nor ignore their increasing and well-deserved needs.
One thing is for sure; the debate about the rich and so-called rich paying their fair share is beginning to wane. In a Gallup Poll, 52% of registered voters think taxes are too high, with independent voters at 58%, which is even ahead of GOP voters.
According to a Fox News poll, the biggest gripe is not about the amount we are forced to pay (which came in at only 9%), but what government spends the money on, which topped the list at 35%.
Tax season always feels like an unsparing hurricane, and this year is worse with higher tax rates and fewer deductibles for many.
Right now, 20% of workers are paying 90% of federal taxes and it is not making the nation any better. In the meantime, the same solution trips off the tongue of the president and his advocates; they clearly do not have faith in the fact that unleashing wealth will lift all boats.
There are good habits and there are bad habits, and our out-of-control spending is the latter. Sure, we can push this thing until it breaks, but that will be the point of no return. In the interim, I think it is a mistake to jettison the "Warthog," as it is a symbol of success and beauty.
Stocks opened slightly higher this morning despite a CPI report which was a tad higher than expected, and the Empire State report less than consensus on weak orders. The CPI news will not alter the plans of the Federal Reserve.
All in all, the mood is still cautious.