Whichever Way the Wind Blows

Let’s not call them the smart money. I have always been wary of that term. Let’s just call them the big money boys. What are the big money boys saying? Some of the largest and most famous money managers on the planet have been warning in recent weeks that asset prices have gotten out of hand and the Fed is inflating a bubble. Add Larry Fink, CEO of Blackrock, the world’s largest money manager, to that list. Fink is the latest to warn that the Fed’s quantitative easing policy is leading to the formation of a market bubble and advised the central bank to start tapering immediately.

What are the big boys doing with their personal money? There are many reasons to sell stock and only one to buy but when big money players cough up large percentages of their holdings we take note. Blackstone President Tony James sold 3MM shares of his personal holdings of Blackstone this past week. He started the year with 10MM in Blackstone shares and with this week’s sale he is now down to 3MM shares in his personal account. Blackstone, the company, has been clear in that they are selling everything that isn’t nailed down as its Global Head of Private Equity had this to say last week.

We’re in the middle of an epic credit bubble … the likes of which I haven’t seen in my career,” said Blackstone global head of P-E Joe Baratta last month. “Valuations we have to pay relative to the growth prospects are out of whack right now.”

The latest Fed meeting ended without much fanfare but markets seem to think that the Fed may have positioned itself as less dovish than in its previous statement. A Central Bank’s biggest weapon is its mouthpiece. Just a word or two from a Central Banker can move markets. The reality may be that the Fed is just coming across as wishy washy as they are now data dependant. The Fed seems to be blowing whichever way the data blows.  Markets may begin to falter if investors lose confidence in the perception that the Fed is an all knowing omniscient body. The Fed is beginning to look like high school kids huddled around a Bunsen burner trying to figure out how to run an experiment.

Small caps diverging from large caps in a sign that markets may be stalling. Most technical indicators would agree and are signaling overbought conditions. Oil continues to flash warning signals that the ecomnomy is cooling as oil refuses to catch a bid. West Texas Crude (WTI) is down over 6% this month.

The calendar may be the key. New month means new money and a tailwind for the bulls. If the bulls cannot sustain upward momentum with the tailwind of new money next week then the path of least resistance may be lower as the bears gain confidence. The closer we get to the end of the year the more volatile things may get. The next several days could hold the key. Yesterday was the 15th day of an uptrend. If form follows we may go down for the next 3 weeks. But remember, whenever you find the keys to the market they have a habit of changing the locks. (H/t Cashin)

To learn more about us and Blackthorn Asset Management LLC visit our website at www.BlackthornAsset.com .

A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty. – Winston Churchill

Disclosure: This blog is informational and is not a recommendation to buy or sell anything. If you are thinking about investing consider the risk. Everyone’s financial situation is different. Consult your financial advisor.


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