Today's Market
by Dr Invest

The dog days of summer drive a crazyness that comes from just too much sun, at least that's what I'm thinking. The past two weeks have brought some of the stupidest moves ever made by the trading community. At least that how it seems to me.

We lost 2% yesterday, we gained 1/2% today and already some are touting that we have seen the bottom of the bear run. The suggestion is that from now until the end of the year is nothing but gains-land. This is just about as nutty of a suggestion as I have ever heard.

This year's market has been marked by unusual contrast. There is no doubt that the 12% gains at the first part of the year was highly unusual, but contrasted to the gains was the breath taking decline that virually erased that 12% gain in the first part of 2012. Once again, the market rose in June 8% and now, we are seeing that 8% erased. There is nothing unusual here.... you can't have a GNP of 2% or less and expect a gain in the market of 20% or 30%. Money has to come from some place for the market to grow. How about Europe? Will Europe provide that influx of cash from trade with the U.S. No! They are in the middle of a recession with some countries having unemployment at 25%. How about China. Will they buy our goods and send us cash. Uh...you haven't heard that their ecomony is shrinking? I think you can see the dilemma here.

There is no place from where we are going to get this burst of cash into the economy. That is why businesses are not hiring and not producing (much) because people are not spending. Keep in mind the principle: Money in > money out! You can't spend what you don't have. You can also imagine how TAXING companies, when they don't have money coming in, will destroy the goose that lays the golden egg. Companies don't have money to spend unless people are buying things.

CONFUSING SIGNALS

From Bernanke

Over the past 6 months, so much money has been lost that traders are desperate for an advantage that will make the money. Already used to the temporary market expansion that comes from QE-1 and QE-2, traders have expected QE-3 and even demanded QE-3 from the FED. The actual expansion of the market from the QEs has lost its effectiveness with the length in which the market is affected becoming shorter and shorter. There are reasons for this that I won't go into here, but adding two or three hundred billion when it will only affect the market for two or three weeks just doesn't make sense unless the market is truly tanking. It is like crying, Wolf! Wolf!  There is no need to stimulate the economy for benefit of traders. (Wall Street) Bernanke though, has held out that an new QE was eminent should the market turn down. Well the market did fall 12% with no QE-3. Traders keep thinking to themselves, now should be the time for the new QE-3. So the traders bid up the market in hopes of a new QE-3. When it doesn't materialize, the market falls once again, erasing billions of dollars of investor's money. (So much for that 2% fee to your financial adviser who sold you the promise of glorious gains.)

From Finanical Institutions

On March 21st of this year analysts at Goldman Sachs (GS) announced that it was the best moment to get long stocks in at least a generation. In a report Goldman's Chief Global Equity strategist Peter Oppenheimer made the case that stocks were historically cheap relative to bonds and the anticipated growth rate. The work is largely forgotten now but created a lot of buzz with the S&P over 1,400 at the time.

As first reported by BusinessInsider.com yesterday morning, Goldman Sachs clients received an email advising clients to short the S&P 500. Authored by Noah Weisberger, the Head of Goldman's Macro Equity team, the report cited evidence of economic weakness as the catalyst for an expected drop of 5%. The email was sent at 10:52am et at which time the S&P was trading at 1,351 and on its way to a 2% drop for the day.

There's nothing legally wrong or even particularly sleazy with being bullish all Spring then flipping the script the first full day of summer. Most people are happy to give Goldman a pass on the "generational buy" call being made 4% higher than the insta-short suggestion. Trading isn't a sure thing, even for the sharpies at Goldman. http://finance.yahoo.com/blogs/breakout/goldman-sachs-short-long-always-winning-153900357.html;_ylt=A2KJ3CdQCOVPW3QAP67QtDMD

The problem we have is that opinons from analysts and fund managers are as widely varied as the ups and downs of the market. What is important is that Goldman Sachs likely profited from their positions, but more disturbing is the possibility that Goldman Sachs lost investors money-O-plenty.

Let's look at your Goldman Sachs investment below:

Notice the dates...January to Present. Please....Oh, please notice the yellow circle with an arrow pointing to it. I read the percentage of my return as -1.81%. If I had invested $100,000 with Goldman Sachs, I would now have $98,190. I didn't get tagged too badly, BUT...your financial adviser takes 1/2% each quarter for investment advice, so subtract another $1,000. Now your nest egg is valued at $97,190. Does this seem like a good investment of your money?

You be the captain of your ship. Goldman Sachs doesn't need to instruct me about the ups and downs of the market, when their investments are clearly DOWN.

(Note: the above article is for entertainment purposes only and not to be used as investment advice.)