Going Down

Well I'm going down
Down, down, down, down, down
I'm going down
Down, down, down, down, down
I've got my head out the window
And my big feet on the ground

"Going Down" by Jeff Beck

It's a good thing the markets were closed Monday and we only had four days of trading. Tuesday the markets were up nicely as it appeared obvious that Scott Brown was going to become the new Senator of Massachusetts. But the next three days saw stocks fall more than 5% for the first time since the rally began from last March's depths. Yes, Mr. Brown woke up a lot of people in Washington to the fact that none of their jobs are secure, anybody who had a hand in this economic malaise is at risk. Being the astute politician that he is, President Obama quickly jumped onto the peoples side by announcing all out war on Wall Street and those fat cat bankers. He brushed aside Treasury Secretary Tim Geithner, and trusted advisor Larry Summers, to embrace the respected former Fed chief Paul Volcker and his plan to break up the big banks. 

Restricting a banks ability to grow, increasing regulation, forcing them out of profitable lines of business, and capping the amounts of money they are allowed to pay employees will not foster growth in the economy, it will stifle it! 

If Volcker's in, that means free money for everyone, Ben Bernanke is out. Not that Bernanke doesn't deserve to get canned, since he was at the helm as the financial system he watches over nearly collapsed, its just that Wall Street hates uncertainty. 

On top of all of our political issues, we have the Chinese government tapping heavily on the liquidity brakes (China's stocks down 14%) and all commodities tied to China's growth down strongly. Then we have Greece's continued default dance. And lastly, late on Friday the UK government increased their terror alert to Severe meaning a terror attack is highly likely. 

Now some contrarians like to buy dips, but this one feels a bit heavier, there is just too much uncertainty. Too much hostility towards Wall Street. Too much going down. Down, down, down, down.

My indicators still have us fully invested in equities and commodities, but we are moving closer to neutral in several categories. 

Be careful out there,

Chris Wiles

This article contains the current opinions of the author but not necessarily those of the Rockhaven Capital Management.  The author’s opinions are subject to change without notice. This article is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.