Jared's Market Commentary - Did I miss anything while I was gone?

By Jared Rosenbaum

Aloha ahiahi,

So off I go on vacation and apparently the market decided this was a good time to make massive moves up and down every single day. Fortunately for me, the market opened at 4:30am here, which allowed me to watch most of the trading session before anybody was really awake and/or ready to go. Other than watching the close on a couple of specific days, the morning pretty much told you what you need to know about the direction of the market on that particular day.

I am getting ready to head to the airport to return to the frozen midwest, but before I go, I figured I'd share a few thoughts. As I see it today, here are the two arguments for the bulls and the bears:

Bulls: Unemployment at 8.9% plus 222,000 private sector jobs created in February, corporate earnings are strong (and growing, as of now), corporate balance sheets are holding a gazillion dollars in cash, so any weakness in the economy can be cushioned easily, and consumers continue to gorge on iPads and flat screen TVs.

Bears: Commodity prices are through the roof - oil is at $105 (gas here on the island is $4.00, don't know what it is back home), cotton is through the roof, which means either clothing prices are going to rise or margins are going to be severely pressured, and pretty much all other commodities are on fire as well (silver hit 30 year high on Friday); unemployment is only at 8.9% because the number of people looking for jobs continues to decrease...more and more people are becoming discouraged from looking for jobs; the unrest and revolts (and threats to do so) in the middle east are mounting and if Saudi Arabia has a problem we're all screwed, but even without, eventually some lunatic is going to blow up an oil field, oil pipeline, or something of that nature; consumers are spending again, but at the expense of their personal balance sheets via more reckless borrowing; and financials are overpriced, as they are hiding billions in losses on their balance sheets.

Ok, so I know it looks like I overloaded the bear case, although based on what I hear this is how it looks. And really, in some ways this is what the market situation has been for the last year and a half. Everything looks awful yet we march higher and higher. And as of right now, I think that's what happens again. There are knee-jerk reactions to bad news, but they are forgotten within 24 hours. This last week looks more like consolidation that will ultimately pop this market up over 1400 on the S&P. The longer we go back and forth and end up in the same place, the more likely this will happen.

Now, if anything truly negative happens (i.e. massive revolt, major oil spike), we will lose 5-10% in the blink of an eye...but you really would've thought that it would have happened this week and it didn't. The market was down 2x what it was at the close today, so buyers just keep coming back. Plus, with the market up strong basically every Monday over the last 2 years, would you really stay short into the weekend?!

I ended up much more active than planned while on my trip. I actually rebalanced my/our retirement accounts this week to be 50% long and 50% cash/bonds. While I do believe we're going to continue to rally, I now believe the potential for a severe drop is really enough that I'm playing the middle. I figure the worst case is the market goes up and I only get half of what I would...better than losing all on the way down (if I had more flexibility in this account I would be more aggressive, but based on my limitations of trading, I'm playing it safe). In the trading account, I blew out of all of my long positions late last week/early this week and did mostly 1-2 hour day trades to the short side, grabbing a few bucks where I could. Going into this weekend that account sits at 100% cash. Should the market continue it's consolidation and/or move up, I am looking to get long (WHR), (CNC), (OPEN), (AH), (GOOG), (BZ), (CAT), (CCF), just to name a few. Realistically it could be another week of choppiness, in which case I will be in and out of positions both short and long. Plus with coming back from vacation, I am likely to be overloaded at work for a couple of days, and might not be able to watch the screen as much as I'd like.

For those that are more long-term oriented, I would just stay the course, as there is nothing that signals "impending doom" any time soon. Even a 10%, or even 20%, correction will probably be erased in a reasonable period of time. I can't say I really get it, with all the long-term issues in front of us, but so far long-term doesn't seem to matter.

Mahalo!

Jared