Mad Money Has A New Meaning
If you are a fan of Jim Cramer, you know he has a somewhat successful investment show on MSNBC. The idea of Mad money is to get you the retail investor to the point where you make some money in the market making it the money you can re-invest or improve your quality of life. That's why it is called Mad Money.
Now we had read the weekend Journal and this Barron's and came to the conclusion, what happens next week is anybodies guess. There too many important question marks flying out there to make an educated guess. We have a couple of economic data points to keep an eye on and a very short list of International tells to be released next week, but the sidelined money will be waiting to see what the European Central Bank telegraphs about what might be going on to address their conundrum. All eyes will be on Bernanke on Friday as he speaks at Jackson Hole to indicate what if anything the Fed might do to artificially prop up the market again.
After reading all of this yesterday and last night, I decided to see what Mr. Cramer's read on the situation might be. If you did not see Friday's episode of Mad Money, watch it. Go On Demand it or iTune download it, because it was great. He did not do his "game plan" for next week like he usually puts together every Friday. Instead he walks his listeners through the basic mechanics of the investment industry to explain why bad things happen to good stocks.
The two things I took away from that episode is, Mr. Cramer does not have a clue as to what will happen next week, and that he is a great educator. He did a great job of explaining that Mr. Market does not act rationally and when we explain irrationality in the market we quickly begin to believe almost anything. We strongly encourage you to watch this episode, it's a keeper.
So let's take a look at next week and see what will be reported. Tuesday, we have new home sales reporting. Consensus figures range from 302,000 units to 320,000. Now we (our collective voices) are flashing back over the last 4-6 weeks remembering Boehner and Obama scaring the crud out of everyone because if they (The Parliament of Whores in DC) don't come up with a sound debt reduction package (which they did not) the sky will fall and destroy the economy, double unemployment, eradicate the US dollar, and make us unappealing to the opposite sex or if you are so inclined the same sex. Now is that the environment you want when you are looking to buy a home?
Our guess is there will be a miss and a big miss to below 300,000 as part of this self fulfilling prophecy. The market will not like it. In the back ground and way off the radar, Tuesday we get a look at France's consumer consumption report. This will be a good "tell" as to consumer sentiment in the land of Bordeaux and brie. Our guess is, not healthy and the markets in Europe and the UK will struggle with the news.
Wednesday we will see mortgage applications. Enough said, more bad news. Then the durable goods orders is also released and while the consensus on a significant year to year drop (from 7.6% to .1%) we believe the number will be negative for the first time since December 2009. Again of the radar but important to keep an eye will be the latest report from European Economics Research Institute (aka ZEW) out of Germany. European Bankers follow this close and will use to make decisions about Euro zone bailouts.
Thursday we have the weekly jobless claims numbers and 405,000 is baked into the market. Less than that and we could see a report performance of the 3-4% drop we saw last week.
Friday is entirely up to Bernanke. Our concern is he does not have many arrows in his quiver. He has already promised to keep interests rates low though 2013, an eternity in economic speak. That leaves another round of QE III which does not have unanimous support in the Fed and on Capitol Hill. Then and we think the best thing he could do, but few gamers would see the significance (but hedge fund managers and mutual fund managers would) would be to get rid of the fed's deposit interest for member banks of .25%. That would force member banks to go out and earn a return. That means they would have to loan money.
So although Cramer and I do not know what will happen next week, after putting it to paper, it is clear that it might not be pretty. Now the planet could wobble and flip its axis and housing starts will explode, the frenchies will be buying everything under the sun, mortgage apps will begin stacking on realtors desks in all 50 states, airplanes, cars and dishwashers will inflate the durable goods orders because so many newly employed people need stuff, and Bernanke will lay his hands on the economy and heal it.
So look for another down week in the market. Perhaps the other 2-3% we suggested this week in the blog. Gold will break 1900 and the VIX will breach 50. (take a look at the September VXX 40.00 call option for 4 and change) If you bought PUTS as we did, you should see some green numbers begin to appear, of course they will be offset by the red numbers on your core holdings, but that is why we bought the PUTs.
Wish we had better news for you, but that's our story and we are sticking to it. Until our elected officials inject some confidence in the market by saying it will be all right and go out and spend (Bush after 9/11) and put money back in the market (Reagan, Clinton, and both Bushes did that.), this self fulfilling prophecy of doom, devaluation and deflation will continue, so go buy something today! There were a lot of people at the Spectrum Mall yesterday. Not many were carrying bags?
Salve Lucrum
