Actionable insights straight to your inbox

Equities logo

Cash Becomes King Again as Uncertainty Grows

HIGHLIGHTS TODAY: Big investment picture, fiscal cliff, stock market correction, presidential election, Unemployment rate, leading indicators, housing, jobs, euro-discord, economy, recession,

HIGHLIGHTS TODAY: Big investment picture, fiscal cliff, stock market correction, presidential election, Unemployment rate, leading indicators, housing, jobs, euro-discord, economy, recession, corporate earnings, Google, Facebook

The market is down 4% in six days and could bounce briefly at any time, but beware, risk is high.
I have experienced every bear market since 1962 and am not easily rattled. I seek to exploit extremes to buy or sell, as I did with a BUY on March 9 with the DJIA at 6,800.
But the market is now UP, not down, and I do not like what I see happening to America during this ugly campaign, disgraced by lies, manipulation, attempts to deny voters their right to vote and worst of all a voting public that is not interested enough to do a small amount of homework on the issues to protect their interests.
Tension is mounting. I see it, feel it out. Our country is becoming more and more divided. I wasn’t around in the 1860’s when the nation and families were divided, but I was in the 1960s. At the core is the jousting for power. The United States is the biggest enchilada on earth and clashing ideologies are stopping at nothing to win the prize.
Raise Cash !
Investor’s first read – an edge before the market opens
DJIA: 13,103.68
S&P 500: 1412.97
Nasdaq Comp.: 2986.11
Russell 2000: 816.82
(Friday, October 26, 2012 (9:09 a.m.)
No one at this point knows who the winner will be, only the loser – us.
More and more, I see the fiscal cliff mentioned by the press. It there weren’t an election 11 days from now, the horrors of the fiscal cliff would headline every newspaper, blog, talk show and radio station on a daily basis.
But it will, and the consequences of
Uncertainty surrounding the prospect for sequestration, automatic spending cuts, as well as the expiration of the Bush-era tax cuts have adversely impacted consumer spending plans and especially corporate spending, hiring and investment this year.
We are in this mess because Congress has refused to address the issue of the continued expansion of our nation’s debt in a balanced way.
What is important for investors in coming months is the perception that Congress will let the nation plunge over the cliff on December 31.
Common sense dictates, Congress will find a way to postpone or water-down a solution, which would not be quite as bad as the plunge.
The impact of angst on the stock market stands to be huge.
CONCLUSION: I am highlighting the fiscal cliff today because it will become the overwhelming negative that the stock market will face after the election.
If President Obama wins re-election, Congress will go to the wall in rejecting a solution as it did a year ago. If Gov. Romney wins, any decision will be delayed until he has a chance to settle in and establish his advisors.
Bottom line: UNCERTAINTY.
I have noted here on several occasions, that Gov. Romney may, in concert with Republican Congressmen, women announce a solution before the election.
Depending on one’s tolerance for risk, a cash reserve is a must consideration. For some that is 10%, for others 50%, even more.
This can get ugly. What’s more, I suspect Street estimates for earnings will be revised downward, especially because the outcome for the fiscal cliff is an unknown.
The combination strongly suggests a sharp plunge in prices. Granted a Romney victory would likely prompt a celebration rally by Wall Street interests, but new uncertainties will arise, since this would be a new unknown, an administration that has pledged to slash programs that have a far reaching impact.
TODAY: The GDP number was a surprise so we may get a brief rally this morning possibly to DJIA 13,185 (S&P 500: 1423).
Based on what I am seeing now, I still think a drop to DJIA 12,720 (S&P 500: 1360) is in the cards before the election, at which point I see a traders’ rally.
ECONOMY: Advance estimate Q3 GDP released at 8:30 Friday was 2% , better than expected vs. 1.3% in Q2.
.George Brooks
*Stock Trader’s Almanac: This is a “must own” publication, loaded with daily, weekly, monthly savvy. It is “the source” for strategies, seasonalities, recurring events, useful stats. Published annually, I have used it every year since 1968. Nothing compares !
The writer of Investor’s first read, George Brooks, is not registered as an investment advisor. Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. Readers are expected to assume full responsibility for conducting their own research pursuant to investment decisions in keeping with their tolerance for risk.

I’m pro-renewable energy. But I’m against worshiping any technology and blindly glossing over its drawbacks.