Thursday, June 18, 2009
(Cont'd from above)...

Jim (cont'd):   

Why all of these contractions… because if things get too good… then Ben Bernanke and Tim Geithner will stop the massive stimulus… and pull the rug out from under the bulls… have to, we will use the Mad Money rug… what we want is incoherent… it is contradictory… and for lack of a better word, it is diseased… now many people like to describe this kind of market using a fairy tale… one called Goldilocks… with her porridge… Goldilocks did not want it too cold or too hot… she wanted it just right… and then the implications that this market is exactly like the porridge… that it is just right, not too hot, not too cold… that is nonsense… you see there is not middle ground… there is no just right porridge for this market… there is only the impossibility of getting everything that we want.

Goldilocks… that is the wrong children’s story… we got the wrong book out of the library… we bought the wrong book at Amazon… if we really want to make sense of this market… we need a very special doctor… paging Dr. Doolittle… he is the only one who can help us… why on earth do we have to reach out to the only doctor that we really trust… other than the ones made up on TV, like Marcus Welby, or Gregory House, or Dr. Fine of Three Stooges fame… because Dr. Doolittle invented the animal that best describes not what this market is… but what bullish investors want it to be… the animal that is the mascot of everyone who wants things to get better but not too much better… and I am talking about… the Pushmi-P ullyu, the llama with two heads with opposite sides of its body, that cannot go anywhere…. because it always moves in opposite directions… this animal is emblematic of the impossibility of pleasing people… this is the creature that cannot exist… because it cannot go exist, let alone procreate… unless someone is closer to the good doctor than I am.

The Pushmi-Pullyu is the right metaphor for this market, not Goldilocks… we want something that is impossible, not a happy medium… but for those of you who are too far away from fairy tales… we can think of this market in terms of sequels… you cannot have Revenge of the Nerds II, where if you recall, the nerds, the food, the beverages, and healthcare stocks all rallied… and at the same time the Jocks, which in this case is anything industrial, technology, oil, or even the banks… yes, banks are jocks too… you cannot have them stay up… there is no world in which the nerds and the jocks thrive… I have never been to that dorm… I have never been to that frat.

If things are good enough than the Fed is done helping us… period, stop the presses… no more need to print extra money… and we will become our enemy… sending the nerds up and the banks, the oils, the industrial, and the techs down… and if the economy is too bad and the situation is not getting any better… the result is the same… we need to hide the nerds in the supermarket aisles hoarding Cheerios, and Coke Zero… that is the fundamental problem… we cannot go too far in either direction and like the outcome… but we wish that we could be stuck some where in the middle… by the way, we are gigunda fans of Tony the Tiger of Frosted Flakes fame… and we like to put an Exxon tiger in our tank… but this two headed tiger that the bulls are wishing for just won’t stand… it is not a Liger, it is not a Tiglion… it is the Exxon tiger and Frosted Flakes are great tiger.

So how do we solve this conundrum… I mean what happens to rid the market of the Pushmi-Pullyu… only one thing can do it… and that is the elixir… the panacea that cures so many of what ails any market… price… it has to go down… if stocks were lower… if they were valued more cheaply… than we could handle the disappointment of earnings from a weak economy… that is how we will be able to handle it… and we know the Fed will have our back… it will not be this Fed, it will be the right Fed… the only way to solve the Pushmi-Pullyu fairy tale… is with some cold hearted reality… we like Caterpillar, needs rates low and stimulus high… it is okay at $24, not at $34... we can buy Nucor, the big steel company below $40 with a nice yield, but at $47, we need a much stronger economy… that will give us much better earnings than they have this week… but if prices get too high… it heightens the contradictions… to use a term that I picked up in one of the 15 different courses I had to take on Marxism in college.

But at lower prices we could care less about the Pushmi-Pullyu… because we do not need things to be that much better… it is not pushing and pulling nearly as hard… price solves a huge number of problems for technology, for oil, for banks… we cannot get enough Morgan Stanley in the low $20’s… especially with the repayment of TARP ahead of us, and the Fed printing money like mad to keep the rates down… but we do not want it at $28, unless we know that earnings are going to explode… we are going to go into Target and buy things at Target… and buy the stock of Target if things are really better… but we cannot pay up here… and we are not going to buy the stock of Target if they aren’t… and look, things just aren’t that much better.

Here is the bottom line…

▼   ▼   ▼   ▼   ▼

The Bottom Line!:     Until prices come down and relief the pressure of the Pushmi-Pullyu, we are stuck in the Revenge of the Nerds II… to mix metaphors completely and utterly… a situation that is great for a handful of companies in your medicine chest in the kitchen… but is simply deadly for the three-in-one-amid, of oil, banks, and tech… and things will not get better for them until they get cheaper… it is just that simple.

[verbatim recap]

[end of segment]

Read Jim's next Segment here  

Read Jim's next Segment here