Monday, July 18, 2016

This will end badly warns Gartman

Are stocks over-done on the upside? Yes, of course and that is stunningly clear from the fact that the CNN Fear & Greed Index finished at 88, a level exceeded only once in the course of the past three years when it touched 93 back in the spring of ’14. However, even then the market continued to run to the upside and it is worth remembering that fact. The market was egregiously over-bought then and it became even more egregiously over-bought in the weeks and months ahead. 

As Keynes said, “The market can remain irrational far longer than we can remain solvent.” The present “irrationality” may persist and likely shall. It may be ill advised… and very so… to initiate long positions here, but it is still wise to remain long of what one owns in order to participate in the “game” as long as the music is still playing. There will come a time when the music stops; when the reality of the situation created by the world’s leading central banks hits and hits hard and when the game turns ugly and bloody, but that time is not yet upon us. So we are to dance while the band plays; the champagne’s cold; the ladies are beautiful and the men are handsome, for soon enough it will all change… the only question is “When?”:

As Lord Keynes reminded us, the market can remain illogical far longer than we can remain solvent, but when we couple Herb Stein’s dictum with that of Keynes we know intuitively that something is going to  give; that these closed end fund premiums are doing to collapse and that this will end badly. It’s a given; it will happen!