In the movie Network, the senior media executive, totally fed up with the lack of professional integrity in his industry, loses it on camera and tells viewers that it’s time to declare: “I’m as mad as hell, and I’m not gonna take this anymore!”
Those are my exact sentiments toward the financial media.
The financial media has talked up “green shoots” and this market rally so much in the past six months that they have actually contributed to a state where it seems the equity markets have, in a manner of speaking, lost their collective mind.
And now, with the market weakening a bit, TV anchors, especially the redoubtable (and someone you should always doubt) Larry Kudlow, are scrambling as they try harder and harder to spin the market and economic data that is not as rosy as people were hoping for at this stage of the green shoots recovery.
And I am fed up with it!
Let me put this in very clear terms: You should ignore anyone you hear on any financial news network that is optimistic about the economy.
The Real World vs. CNBC ‘Reality’
I live in the real world. Here at the beach in North Carolina where I am vacationing, stores are closed and new home sites look like a lunar landscape. I actually went into open real estate offices for said home sites (a little research on my days off) and there was no one there — literally.
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The Virginia rest stops we passed driving here were closed (the state is broke). There was no line at Olive Garden (the only sane place to feed three teenage boys). And homes that were for sale in 2007 and 2008 are still for sale, as is raw land and anything related to real estate.
But according to the shiny suits on CNBC, real estate is rebounding. Where, Prague?
At current rates of sales growth in the residential housing market, we will hit 2007 levels in 13 to 17 years. The banks still have hundreds of billions of dollars worth of bad loans, and loan defaults and foreclosures are increasing.
Traders and Pundits Controlling the Market
I am fed up not so much with the fact that the market has temporarily decided to ignore fundamentals (baseball managers sometimes do the same thing and they are my heroes), but with the traders who are dominating the market to the point that stocks are no longer a true investment vehicle.
I do fundamentals — short what is broken, buy what is doing very well.
And anyone who passed third-grade math and has a passable acquaintance with the English language can see — make that, should see — that the economy is a wreck, the green shoots are really brown, the rise we will see in GDP is statistical and not in the real world, and that the optimism of the pundits is really that of traders touting their own books on CNBC. (For a good laugh, check out the hilarious piece in The Onion titled, CNBC: ‘Anyone Who Owns A Suit Can Come On Television’.)
Now, what should you do about it?
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What Should You Do About It?
You’re best bet it to ride the “W” — that is, the shape of this recession.
In the real world, economic conditions continue to deteriorate from business activity to employment, but the slowing of the rate of decline, termed green shoots, has driven the rally that constitutes the second leg of the W — i.e., the first leg up.
And when the green shoots turn brown in traders’ minds, as they are beginning to do, we will hit that third leg — the second leg down in the W — in Q1 or Q2 of next year.
So, I am urging my subscribers to play the tail end of the leg up and get their cash and trades ready for the slide down the next leg of the W.
Of course, when I made a recommendation for them to go long an index — in a newsletter entitled ChangeWave Shorts! — the market immediately headed south. But I attribute that to a lack of buyers, not too many sellers, and I believe we will see a spike in the market after Labor Day.
So, in conclusion, I am fed up with traders and their accomplices, the pundits on CNBC and Fox, talking up the market so much that they are, in effect, propping up the market.
But here I am talking it up, too — but only for a couple of weeks, maybe a month.
But talk is cheap, and the market is not. Finish the ride up, get ready for the next leg of the W, stay tuned for how to play the market’s slide, and get a new suit — it may get you on CNBC.
Let Michael Shulman help you make money on the short side of the stock market. Download a free copy of his new investing guide, Double Your Money — and Double it Again.
