Did I Miss Something?

I have been away for the last couple of days, I see the S&P 500 closed Tuesday at 1213 and then closed Thursday at 1206. So I guess it was a pretty boring couple of days? Not much news? Thank goodness the craziness ended, what a relief. Hearty chuckle.

This will be a tricky post, hopefully I can articulate this clearly--not joking around.

The biggest decisions in top down management is whether to be in the market or be out. If you have been reading this site for more than 20 minutes you know that my take on that is defensively postured versus fully invested hindering on the market being below the 200 DMA (demand unhealthy) or above the 200 DMA (demand healthy). No matter what you think of that, it is simple.

Sector decisions and country decisions are not quite as simple as being in or being out but certain sectors do well early cycle other do well late cycle, I've written about the inverted yield curve's important probably 100 times. Regardless of how complex (or not) you perceive the things I write about I stick to them and you can look at the quarter end video's to see how it has worked out.

I have no plans to change the big picture aspect of how I do things. No matter what is going on, if demand is healthy I will be much closer to fully invested, if demand is poor I will be defensive. Feast, famine, pestilence, boom, raining gold coins, whatever; demand is either healthy or it is not.

Taking this approach means it doesn't really matter whether you are right about too many things going on in the world. This leads me to what is happening right now.

Part of this entire mess before us may have come from unintended consequences of past actions (some think this, some do not, I think there is something to this line of thought). There is also an element of the store not having been properly minded contributing also. The store not being minded is due in part to either incompetence or negligence.

If any of the last paragraph seems within the realm to you then it makes sense to think about the unintended consequences of the efforts being made to fix our grand mess. At some point do we jeopardize our credit rating? Would there be political pressure to maintain the AAA rating? If so, isn't part of the current problem that paper that was not really AAA was rated that way anyway?

Just how much will the RTC-like solution cost? How will they value what they buy? How will they dispose of the assets? Who will buy them? What about moral hazard?

Doesn't the idea of banning short sales has unintended consequence written all over it? Anything that impedes two-way markets is scary territory.

Anyone who says we had to have these things put in probably has a point, I certainly don't have a great argument beyond I think there will be bad consequences. Part of the issue is that the excesses that built, that so threaten the US financial system were allowed to develop under the set of rules that existed. If the rules had been better constructed things would have been different. Of course that is utterly useless to say because things were how they were and then blew up like it did.

The stock market is obviously behaving strangely. It is difficult to conceive that the type of action we have seen can be thought of as healthy, it is certainly not normal. Do you own individual stocks, if so how many were up double digits? I had a bunch which is not a brag, it shows just how odd things are right now. This move up certainly could last a few days but who would be shocked if there was another four point something percent drop one day very soon?

I certainly do not have all the answers, I may not have any answers but the S&P 500 is below its 200 DMA so I am defensive. When it goes back above the 200 DMA I will move toward reequitizing.