The market still looks good for the intermediate term especially with the debt ceiling debate likely to be pushed to May, so no panic will ensue shortly.  Weird how the market anticipated this cleverness on the Republicans part.  Although the drop in AAPL could cause some heartburn tomorrow.  And this does cause me some concern, but I think it’s now a story stock of yesterday…the market is sensing something very wrong with that company…and I don’t think it will any longer lead the market up or down.  So, I remain bullish.    Today, I bought into DDD, POL, RMD, and NNN.  ARMH sold off yesterday, leaving me with a long portfolio of:  AIRM, DD, LMCA, LNN, MHO, POL, RAX, RKUS, RMD, STRZA, USG, VMED, and WY consisting of about 75% of my trading portfolio (all with tight stops, of course).    Search on the symbols, and you’ll note that this is light on tech, moderate on energy, and heavy in housing/construction.  It does feel as if housing has bottomed.  But we are not in a market/economy that will be led by technology and therefore productivity.  It’s being led by the basic necessities, as well as likely a nice little bubble caused by the Fed printing money.  Is this a bad thing?  I don’t know…with a contraction of credit comes a contraction of the money supply, leading to deflation.  The Fed is fighting deflation with everything it has…will this ultimately cause folks to lose faith in the dollar/U.S. itself — leading perhaps to massive inflation?  The doomsayers think so…I’m not so sure.  As long as they keep prices stable (and that’s a big if), I believe that this long down/flat-turn will be eased through rather than consist of further massive shocks.

So what is causing this long down/flat-turn?  Well, I just finished reading a couple of fascinating books by Harvey S. Dent: The Great Depression Ahead (2008), and The Great Crash Ahead (2011).  Take the titles with a grain of salt, because he’s been completely wrong about many of his predictions.  BUT.  His model is fascinating.  I now believe that this isn’t just about Social Mood (but this is certainly related), but about the hard numbers of population.  28 is the average age someone in the U.S. gets married, 18 is the average number of years past marriage that their kids leave the house.  The total is 46.  Well, guess what?  The peak of the baby boomer’s birth occurred in 2007 minus 46 years ago = 1961.   What do folks do when their last kid leaves for school?  They start saving for retirement.  Which means that their spending habits decline dramatically.  So, we are experiencing a decline in overall aggregate demand caused by a good majority of our population beginning to save rather than spend.   They also caused the big run-ups into 2001 and 2008 with their profligate spending.  And the stock market simply follows this trend of spending.  This also explains the acrimony in Congress — I’ve worked for companies that are shrinking, or simply not growing.  The internal politics are quite ugly, because everyone is fighting over a shrinking pie.  And that’s what we’re going through today, but at an aggregate level — Congress is fighting over a shrinking pie.  I highly recommend reading these books if you really want to understand what we’re going through as a society.  The good news…he predicts that by 2020 to 2023, we’ll begin another growth phase — only 7- 10 more years of this nuttiness (and not out of line with my predictions based on Elliot Wave theory).  But looking at his charts, I think we might hit a nice economy through 2016, because we’ve now basically made it through the first down wave of the boomer spending decline, and we’re due for a 3 year uptick — but with more pain to follow after that.  So, so far so good, the problem comes if  our government doesn’t prepare us for the second wave down and the world loses faith in the USA itself.

Ok, so now for my coolest trade, MLNX.  If you’ll recall, in mid December, I bought a Put on MLNX.  I did this simply by looking at the chart.  I did absolutely no fundamental research.  Well, guess what, not only has it dropped since then on a nice slope, but after hours today after announcing its earnings, it lost another 20%!!  Which means that my Put probably just tripled in value.  This should tell you just how much information is included in a simple chart…if you know what to look for.

 

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