Duty bound because once again I feel the market could drop precipitously from here.  I was wrong the last time, but the risk is again gaining that this could occur.  The charts and leading stock behavior…do not look good.  Fundamentally, again comes back to Greece, and now France with their recent elections.

Be careful.

As for the belief…I do believe the market believes that there will be no imminent bank collapses.  Therefore, I believe it.  Which means that I must believe in the Fed (and other central banks), at least temporarily.  All the Bears…they don’t believe (Prechter).  I think they think that our central banks will make the same mistakes that led to the Great Depression — only this time bigger and worse as the debt problem is so much bigger.  But, with the Fed having loaned over $7 Trillion in ’09 to our banks and with the ECB now printing money like mad…I do believe that liquidity will never be a problem.  It looks like the Fed is going to fight as hard as it can against deflation (which we’re in far greater danger of right now than inflation).  And I think they can do it, as the value of money is simply a belief, nothing more, nothing less…so perhaps they can continually inflate the economy while we deleverage.  This would cushion the overall blow, but it will also drag it out.  Net, net, if you believe in the Elliot Wave Theory as a model, which as I’ve mentioned before models our optimism versus pessimism in cycles as measured by the stock market and formed by the herding instincts of the lower portions of our brain, perhaps, just perhaps, the Fed is our societal cerebral cortex.  Time will tell.

So, for the Bull Market…I’m back to stock picking versus fretting over the survival of the U.S.  I’ll be looking to add these positions tomorrow for a total of about 40% of my portfolio:  JAZZ, QCOR, FFIV, EXXI.  These stocks are not for the faint of heart…they’re leading high growth stocks, and they’ll be the first to falter before the market as a whole does, so I do not recommend these for anyone who does not watch the market on a daily basis.  But this is how I can time the market…if these falter in unison, then the whole market is about to falter (which is how I got out before the semi-crash last year).  On my watch list are: ACOR, ALLT, FSL, Z, and AAPL.  I think these are also good picks, but for technical reasons, they don’t have good entry points at the moment.

And what kills me the most about those of you who are still in the market, yet who read this blog, is that there are very few instruments yielding more than 1%!!!  And if you’re in stocks, they take far longer to go up than they take to crash.  So let’s say there’s a remote 1/6 chance that I’m right, here’s the math:  If you’re in bonds: you’re reaching for 1-2% yield and playing russian roulette with anywhere from a 25-100% loss.  Would you put a single bullet in a 6 shooter, spin the barrel, and put a gun to your head and pull the trigger if someone said I’ll give you 2% more lifespan if you don’t kill yourself?  It’s the damned same bet!!!!  If you’re still in stocks…the only thing that will save them is if Europe miraculously solves its problem, and the U.S. puts itself on a path to fiscal sanity.  And you’ll know exactly if and when both of those events happen.  Until then, stocks are going nowhere – same crazy trading range they’ve been in for some time – or they’ll die.  If you get out, the worst case is that you’ll lose a few days of upside.  That’s your bet: a few days of upside versus a potential catastrophic loss of your savings.  Doesn’t make sense to me…

Stay safe.  Please.

View the full VIX chart at Wikinvest

Getting the daily timing of this is very, very difficult.  But, we are in for a major crash.  The VIX (volatility index) is declining along with a decline in the market (it usually goes up), which tells me that it’s quite possible the big boys are now sneaking into the market to sell (orderly big boy orders “cushion” smaller orders up or down, dampening volatility).  This is like a game…its’ likely that everyone in the know is sneaking in their sell orders…but once it becomes too obvious, that’s when the panic selling begins, with very few buyers.  I’ll closely watch the market tomorrow…I’m also waiting for one of my favorite indicators to issue a sell signal (just today it went to cash from buy — I’ve correctly ignored its last 4 signals (“Use the Force Luke”)…but this time I think it just might be correct).   The timing I’m basing on technical analysis…the fundamentals, well…we’re done.  Read the book Endgame: The End of the Debt Supercycle and How It Changes Everything last week. There is simply not enough creditors left in the world to backstop anyone.  Just today, in a buried article, I read the word ‘depression’ in a mainstream magazine, Business Week, referring to Great Britain.  They have far more debt relative to GDP than almost anyone else, except perhaps Japan.  You don’t hear about them because they have the ability to inflate their way out by printing the pound.  Greece/Italy is a bigger problem, because Europe will not bring themselves to “fix” (read: kick the can down the road) their problem.  The big wild card is the Fed.  Will they inflate our way out of this?  I have no idea.  The one thing about Robert Prechter (remember, he wrote the book that felt like I was reading a book to a movie I’d seen) is that he was wrong on his prognostications about how far the Fed would actually go.  But he’s been dead on regarding how everything else is trading, including Gold and commodities…all dropping, signaling deflation.  (Gold is NOT a haven right now.)  Cash is King.  I don’t even trust the U.S. gov’t to pay its T-bills (relative to the yield)…I’m just staying in cash, in the most trusted currency in the world, the U.S. dollar, and next week I’ll spread my money around some smaller local banks with a strong financial rating (www.weissratings.com – it’s free!  Use it, please) linked to a strong brokerage, Interactive Brokers (who, by the way, only charges a dollar per trade) so that I can buy my Puts when, hopefully this time, my timing is right (the Fed’s move two weeks ago only two days after I bought my Puts should indicate just how in tune I am with the market).  Stay safe everyone…unless you’re shorting, it’s just not worth it to be in anything but cash/T-bills right now…you may not get your money back for years, if ever.

I think what this does signal is that the Fed will be willing to truly inflate the economy, rather than risk deflation, which would be catastrophic.  We’re not out of the woods yet.

Why the title of this blog?  Because Buffet has been making big bets in U.S. companies.  He thinks stocks are undervalued right now.  I disagree, and I think they’re heading much, much lower.  Basic reason is that there is not enough money to back-stop Italy.  Anywhere.   Even if Germany would agree to do it.  We’re at a precipice…and I think Germany and France are going to let Greece/Italy fail to save their own skin.  The European banking contagion will then spread to the U.S. (just as has already started with MF Global).  Then our banks will begin to save their own skin, and will shut down lending.  And when the credit stops flowing in the U.S., again, our world wide bubble will burst (2001 and 2008 were mere steps in a much bigger credit bubble bursting).

But, I could be wrong.  So here’s my strategy:  I’ll take all of my cash out of my sweep accounts held at E*Trade Bank (because it might fail) and start buying short term Treasuries (if the Treasuries aren’t paid, I’ll be buying guns and ammunition — not literally (well, maybe), but the point is if the U.S. Government doesn’t pay its debt, we’re gonna have awfully bigger problems than how to trade a computerized brokerage account).  Then I’ll take about 5% of my portfolio and buy 2013 Jan Puts on QQQ (Nasdaq ETF) and GLD (Gold ETF).  Reason is this: Gold and the market have been trading almost lock stock with each other because no one is trading individual anythings right now…it’s all about how much money is available to buy anything — pure liquidity based supply and demand.  If I’m right about the macro picture, both gold and the market should continue to trade with each other for about another 2-3 months (steep drop).  If I’m wrong, gold and the market should lose their correlation, and I’ll lose less money or perhaps none if they go truly opposite of each other.  If I’m correct, both Puts should be worth quite a bit of money in about 3 months, and I’ll reassess and scale in more, depending on my outlook.  I was trying to pull this trade off today, but ran out of time before the market closed.

Net, net, friends and family.  Get out of the market.  Per the reason of this blog:  ”Just letting you know.”   By the way, I truly hope Buffet is right.