MARKET COMMENT
February 28, 2007
Sometimes I have to reach back to 35 years of Hawaiian
vocabulary to sum-up current conditions.
Kapukahi [Kah-pooh-KAH-hee]
comes to mind which means roughly what the headline reads.
Anyway, things are pretty screwed-up in any
language and investors will just have to let the dust settle before reaching
for their wallets again.
Mr. Market usually has a pretty good handle on conditions
and following his path and interpreting his message is usually a manageable
activity.
But, yesterday even he got
blindsided by not just the usual suspects [China and Greenspan] but the unusual,
incompetent, fraudulent, unethical unprofessional [I gotta settle on some printable term] manner in which trades
were executed by the NYSE yesterday.
Mr.
Market can’t deal with 200 points in a few minutes of disorderly activity.
Yesterday’s trading disaster will be reviewed by many and
apologies will be issued by authorities.
But, trust me, heads probably won’t roll or at least very far.
The bottom line is the numbers will stick
even if they’re located in a [ahem] dark place.
So it’s bye-bye February.
After several months of putting one foot in front of the other as
markets marched higher, most gains were obliterated in one day.
And most market sectors will score a loss for
the month.
So what
next?
That’s at the forefront of
everyone’s mind.
Guess what?
I don’t know and no one else does
either.
But the technical damage done
won’t heel in a few days.
As I said
yesterday, the best one could hope for now is some sideways movement.
This may take weeks or months.
Perhaps we’ll just have a repeat of the past
few years where markets decline through the summer only to find their sea-legs
and rally in the fall.
Gold and other precious metals seem pretty screwed-up too frankly.
Remember, over the past few weeks investors
have been pushing gold higher based on rising energy prices.
I said then, that would prove ephemeral and
it did in an odd sort of way.
Gold generally
moves higher historically with a declining dollar, higher inflation, rising geopolitical
tensions and financial market distress.
We have most of that presently, yet gold prices have dropped.
Why?
Most
hot money investor’s have weak hands and when a panic ensues, they’ll sell
anything and everything to lock-in gains.
Meanwhile stock markets at least went sideways for the most
part today.
Some bargain hunters
appeared to snap-up some oversold sectors and names but frankly the upside
action wasn’t all that inspiring.
Well, we could outline many more markets but you get the
idea in general.
Are markets now quickly
oversold at least on a short-term basis?
Sure.
Is a bounce
unexpected?
No.
Is it a dead cat’s bounce?
It’s too soon to say.
Are we a little more than steamed at the manner in which the
supposedly reliable exchanges dealt with trading activity yesterday?
You bet.
Will anything be done about it beyond soothing words?
No.
So like many others I’ll just be muttering kapukahi for awhile.
How long that will last is hard to say.
Have a pleasant evening.
Disclaimer:
Among
other issues, the ETF Digest maintains positions in: GLD, SLV, DBP, DBE, DBA,
DBC, SPY, IWM, MDY, QQQQ, FDN and IGN.