The Day Ahead: Why the Market Is Like a Balding Man

 | Jun 13, 2012 | 8:30 AM EDT
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Much to my delight, nobody learned where I lived and waited in the bushes to ambush me following my "ticking time bomb" call on the market Tuesday, which I described both on Real Money and over at Yahoo! Finance (video link). But I'd say this description fully captures the essence of the moment. Every session logged is one in which we resemble those poor unfortunate villagers in the final Rambo installment, who were forced by mean soldiers to cross a two-foot-deep manmade pond filled with grenades.

People are trying their best to avert further disaster in their portfolios, and they breathe a sigh of relief when a trade goes swimmingly for an hour (notice I did not say "investment" -- those are off the table). Then they go into lunatic mode as a minuscule profit becomes a loss because of a totally unforeseen political event, conducted in languages most Americans don't speak. The time bomb, if you will, goes off.

The realist in me believes holding gains into Greek election weekend will be a tall task, and that the market reaction come Monday is anybody's guess. Here are some thoughts.

● We are in a hot-potato climate, except the potatoes are reheated instead of newly plucked from the bag. One day it's Greek-election concerns, the next it's general discontent on Spain's sliver of progress -- and, oh yeah, Greece continues to suffer flight of capital. Off in the distance is this thing known as "fiscal cliff" here in the U.S. Although I dislike this characterization, as it's now beyond played out, investors are heeding Mark Twain's famous words: "I am more concerned about the return of my money than the return on my money." In the land of this hot-potato game, the circle of negative news continues to spin, and will need a mighty positive development to break.

● Going back to the Rambo comparison, there were no survivors in the doomed time bomb water-race segment. In the markets, it's been unnerving for investors to see yields rise in June on perceived safe-haven German and U.K. notes, alongside Spain and Italy. The action implies the market is sniffing a euro breakup, or a tighter fiscal unity in which healthy countries are forced to shoulder the mistakes of weaker nations. Doesn't it all seem to be a lose-lose scenario?

● Let's assume the Greek election turns out better than we currently think. Where does that leave us? We'll have another wall of questions to climb over, including the staying power of a new Greek government and whether the country will ultimately exit the eurozone. Away from Greece, there will also be the June 21 Spanish bank audit results.

● Add another name to the list of names that concern me on second-quarter earnings and yearly outlooks: Scotts Miracle-Gro (SMG). While the company's sales and earnings warning do have a strong firm-specific aspect to it, the fact is that sales slowed drastically from May to June (hello, payback period). Sales mix was unfavorable, as well, with consumers balking at the pricier seed and not showing consistent interest. Further, Europe walloped the quarter, and revised guidance was withheld until the next earnings release. The already-hammered stock will likely be punched in the other eye Wednesday.

Unfortunately -- to return to the title of this piece -- we are in a balding-man stock market. Allow me to explain: The internals (take your pick of news) cause a loss of hair (stock losses) after it had been regrown by using Rogaine (modest positive news).

Investors, this market is not for you. I wish I could put it more mildly. The market is directionless to having a downward bias, devoid of new thoughts and in the process of pricing in risks borne of events happening today and ones yet to happen this year.

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volatility is quite low here, and we could see some downsides here in the short term. ...



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