More Bounce, More Confusion?

Has the stock market "mini-bounce" of the last week sowed seeds of confusion? Recent surveys show a high percentage of bearish sentiment. But these haven't been refreshed since the latest joy ride that sent stocks soaring. Will the bearish sentiment persist, or will there be a swing over to the Bullish side?

If fund flows provide any hints here, the flows continue out of stock funds. But, again, this is looking back on recent action prior to the mini-bounce.

Of course, if you've read recent posts, you'll suspect we're not biting on stocks. Will others take the bit?

OK, what about bonds? We're holding our positions. Losses are painful, but long-term rates have not increased as much as short rates. Will that logic - and the indicators we follow - result in a turn-around for bonds? Can't say. But we did look at AGG (aggregate bond index) back in the last crisis. It fell along with stocks for a spell - just like bonds have fallen with stocks recently. Then when stocks really took it on the chin in later 2008, they turned around and provided a counter-weight, even providing some nice profits. We'll see.

What about Gold, Silver, and Precious Metals mining shares. They took another lashing in August, and haven't shown any really serious spunk so far in September. So we're sitting with some ugly losses with those. The thing is, these items, when they turn around, do so much more violently than stocks to when they finally recover from a Bear Market. So our theory is the positions have already been pummeled enough such that additional significant losses are unlikely, but impressive gains - at some point - are conversely likely. That's our theory. We'll see what happens. 

One thing we finally did this past week was put on some shorting of stocks. You can do this either with individual securities, or let so-called "Inverse" ETFs do the heavy lifting. If you're good at shorting specific companies, you'll likely make more; but the Inverse ETFs will prove themselves if the stock market does what we're concerned it might do this fall: crash.

So we didn't use caps for "crash." We're not trying to whip anyone up. We're not putting fear out there to help our positions by dragging others into the Bear camp. We leave such shenanigans to the Big Boys, like Goldman Sachs, perhaps the most successful of the manipulators. But there are plenty of others who like to seed the market with either greed or fear, then make bets that will benefit when the little guys - or even their own customers - jump in. 

Ethical? You decide.

For now, though, markets may not be the worst thing we're facing. Read about Europe and energy. The governments there are being viciously squeezed by the Russian government which now says no energy until sanctions are lifted. They had stopped gas pipeline supplies a week ago because of "maintenance" (they said). Seems that was BS. 

Look, this has nothing to do with Russia's culpability in the war with Ukraine. We all know they invaded Ukraine. Even those who claim they were "pushed" into invading can't change the fact that they are the aggressor no matter how you look at it. But the fact is there is a war. And European leaders complaining that the Russian government has "weaponized" energy just sounds so lame. In war, governments use every weapon they can get their hands on. Yes? Is it conceivable that Europe's leaders didn't anticipate this?

Whether conceivable or not, when winter comes and the people are freezing, maybe even suffering from lack of sufficient food, or at least varieties of food, these leaders will likely face pretty stiff - no, scratch that - violent demonstrations. Violent as in riots.

If those leaders don't already have "skedaddle" back-up plans at this point, they may very well be as dumb as their decisions make them out to be.

What about here in the U.S.? It's not as draconian. But I'm sure you've noticed your energy bills, never mind food bills. We may get a bit of a respite. But will inflation really disappear any time soon? And if it doesn't, inconvenience can turn to pain rather quickly, starting with those of lesser means.

We'll stop there. Just don't be surprised when the turmoil really starts to pick up in the coming weeks. 

Make whatever preparations you intended to make but didn't.