How much actual? How much emotional? How much technical? How much fundamental? How much fear? And how much prudence?
These are the questions running through my mind about the last couple of hours of trading Tuesday, the ones that were punctuated by an astounding gap up in gold and the ones that seemed to be driven by the hidden hand of David Farr, the CEO of Emerson (EMR), a tremendous economic powerhouse that basically reported, once again, a string of disappointing numbers. Except this time Farr, a nuts-and-bolts guy, came after the government and told a dire story, Titanic deck chair re-arranging and all, that rivaled Steve Wynn's conference call screed in its vitriol. Funny that Wynn, at least, delivered the numbers. But excuse me for being so granular.
Yep, Tuesday was a dramatic day of recognition, of a realization of the lasting damage that Washington has wrought on our economy, and about how even a mild cold turkey on spending -- cold turkey being a term appropriated by my absolute favorite strategist, Michael Cembalest at JPMorgan, in an amazing must read about these issues -- can mean for equities.
We decided, en masse, to take out and shoot any company that relies on the U.S. government for anything, something that left us with a few Venezuelan and Zimbabwean equities to noodle on.
This kind of twilight-of-the-idols day is packed with emotion and despair and P/E shrinking I might add, when we decide that even stocks that benefit from a recession won't benefit from a recession. Hence, that's why I focused on pawn shops the other day, First Cash Financial (FCFS), specifically, which has put up excellent numbers, aided by the realization that there's a lot of gold in them there drawers.
I suspect that any rally, even a nascent one, has to be worried against the obligatory employment number which will be awful even if it isn't because that's the prism we have now willingly adopted.
I am playing it straight, picking at industrials with decent dividends, high yielders with less cyclicality and husbanding a huge cash position that was slowly being put to work with the same guidance I am giving here.
Strategy: Lose less than the other guy. Not easy.