Jared's Market Commentary - Hide the Women and Children!

By Jared Rosenbaum I have a feeling that this weekend, and in fact this whole coming week, will go down as one of the most pivotal times in the history of our country. For the past week we have been the laughing stock of the world, as a few hundred people in DC hold the entire country hostage. I have never seen a topic like the debt ceiling receive so much attention, so much press coverage, and so much talk from "normal" people. Heck, my local news was talking about S&P futures the other morning! All I know is we're going to come down to the last minutes and most likely will still have no deal. I'm not sure if I believe the world will end if we miss this deadline, but I'm pretty sure there will be some unintended consequences that we aren't going to like. Anyway, no matter how this situation gets resolved, we have proven to the world that we have no leadership, no ability to make tough decisions, and clearly no ability to manage our finances...this is shocking to me, that a country that just went through a massive mortgage crisis could possibly have an issue managing debt...as I've said in the past, our leadership really is a reflection of the country...a bunch of ipad using, flat screen watching, McDonald's MCD eating slobs (no offense to YOU, of course). 10-15% of this country is not working and will probably never work again, another 20-30% suck off the government in some other form, we incentivize all sorts of specific people who don't need incentives, we have crazy tax systems that make no sense, everybody hates, yet we don't change, etc etc etc etc etc...and yet we wonder why all of a sudden everything is messed up?! OK, I'll hop off the soapbox for a minute. In terms of the market, I truly have no idea which way we go on Monday, which way we go when a deal doesn't get done, and which way we go when a deal does get done. My personal bias is that the S&P is going to 1250, possibly 1200, and maybe sub-1000 REGARDLESS of what happens. The only issue in my mind is whether or not we get some kind of rally first, on an announcement of the deal...if we ever get one. Listening to these buffoons for the last week, it's obvious that nobody is really addressing the issues. There will be cuts and reductions and blah blah blah, but really this is just politics as usual in Washington. Nobody is attacking the true core issues, nobody is doing the really really really tough things...and therefore, S&P should (funny how everybody criticizes them for not catching the mortgage mess, but everybody is mad at them for threatening the government) cut our credit rating, and other countries should reconsider buying our debt. If you take our country and look at the financial picture, then pretend you're a bank, would you give us a mortgage? If so, please call me, for I personally would like to borrow some money from you! So short-term I think the market is a pure coin flip and we are likely to see continued whipsaw action like we did on Friday, with the market opening down 2%, going back up to being positive, then back down a little under 1% by the close...it's great as a day trader, but will make you dizzy as an investor. To that end, earlier this week I moved to 95% cash in the retirement accounts. The way I see it, if the market rallies on a deal and we go up 2,3, 5% then I will miss it. If this truly turns into a catastrophic event, we could lose 10, 20, 30% in the blink of an eye...seemed like an easy decision for me. Why did I keep the 5% invested? Honestly I have no good answer other than to say at least I have a reason to watch and see what happens. In the short-term funds, I am 100% cash into the weekend. I spent most of the week trying to trade the short side (I exited all those weekend longs before noon on Monday), but mostly I found myself sitting on my hands doing nothing. Things are so cloudy and confusing, I just felt like I was throwing darts and wasn't even sure if there was a dartboard on the wall. I will be honest in saying that I am trying to time this market perfectly, hoping we get a quick rally that I can short and look back in 5 years and claim that "I called the top before the massive crash." Of course, the setup has to be right, the stars have to align, but this feels like one of those times in history where it's worth taking a shot. You will know if I'm right, for I will start talking about how the family is moving to the beaches of Aruba for the next 40 years. By the way, did anybody notice that the economy is coming to a serious halt lately? 2nd quarter GDP was amazingly weak, and all week long, companies have been talking about very weak forecasts. No matter how you slice it, the second half of this year is not going to be what people expected. Perhaps we'll take note of that later in the week when things get quiet. Returning to a pick from last week, I think the sell-off in Molina MOH was overdone. All of the managed care stocks took a hit this week (think Wellpoint, Aetna, etc.) and I think this is a great buying opportunity. In short, utilization remains very low and I think every one of these companies should outperform in the second half of the year. I specifically like those Medicaid stocks, such as Molina, because no matter what happens with this debt/deficit deal, it will be positive for Medicaid managed care companies. If there are cuts to Medicaid funding, they will just pass the cuts along to providers and/or reduce benefit packages (therefore the net remains constant). The trend is for states to move to managed care, so there is tons of growth coming and profitability will be there. These stocks have enjoyed great runs in the last 6-12 months, so it's fine if they want to breathe for a bit. All I can say is to sit back and enjoy the circus. There is really nothing that you can personally do at this point, so just enjoy watching history unfold, enjoy watching our leaders act like idiots, and enjoy your ipad, flat screens, and McDonald's, for we might not get to enjoys those luxuries much longer!