Panic Now! Avoid The Rush

How many times have you heard or read this in Big Media the past few days? “Don’t panic. It’s just a correction.” Since it’s, “As seen on TV!” it must be good advice, right?

“10% is an official correction,” the big media pundits tell you. Apparently, the 10% Rule was passed by Congress, signed by the President, and ratified by the UN, making it the “official” worldwide standard for a correction. Same with 20% rule for “official” bear market. These are laws passed by all world governments and happily obeyed by Big Media pundits, who know all about  “official” and unofficial. When their back scratching buds in the Washington-Wall Street Big Media echo chamber agree, it’s official!

If Cramer or Kelly or Maria said it, then by God, Virginia, it must be so! And if it’s the Wall Street Journal, that, my friends, is the Word. Yes, Virginia, there is such a thing as an “Official Correction!” They come around every so often with bags full of gifts, correcting the minor “excesses” of the recent past, just so you can sleep better and even average down!

Here’s something else you’ll read in Big Media. “This market is crazy.” Both bulls and bears love that one. Bears use it all the time on the way up. Bulls repeat it on the way down. What it means is that the market isn’t behaving as they think it should. But here’s a little secret.  Markets are neither crazy nor sane. They merely measure and reflect liquidity. Depending on our particular point of view, that may seem to be “crazy.” What it really means is that, “Hey buddy, look in the mirror. You’re wrong.” Both bulls and bears may fight the trend for a long, long time. Now, that’s crazy.

Here are two “official” rules that I learned as a kid.

  1. The trend is your friend.
  2. Don’t fight the Fed

I learned those “rules” 45 or so years ago from some old guys trading from the public peanut gallery at a Walston and Co. branch office in Philly. At the time, I had no idea what they meant by that, but those thoughts stuck with me. Over time, I learned the hard way that there was a good reason they said that. So if I don’t obey those official rules, then I’m the one who is crazy, not the market.

The job of the technician and people who, unlike journalists and TV talking heads, trade for a living, is to identify the trend, and identify when the trend is changing. It sounds simple, and it is, if you are diligent, know your history, and pay attention.

But that is not the job of “journalists.” Their job is to attract eyeballs, while promoting the company line. The purpose of their “advice” to the public is to increase the profits of the Big Media organization and its clients, the banks and corporations who pay the bills. Hence just a few days ago Bloomberg fired 80 editorial staffers with its editor-in-chief leaving this little tidbit in a memo for the rest of its “official” information corps,

[I]f you are not intrigued by how people make money, or are inclined to sneer at those who are good at it, or yearn to practice gotcha journalism on investment bankers simply because they’ve chosen to be bankers, Bloomberg is probably the wrong place for you.”

In other words, be positive in your coverage of those brilliant bankers doing God’s work.

This veiled threat is at the core of every Big Media operation in the financial propaganda business. The “official information” transcribers who write the stories for public consumption understand it well. So it is that we get things like, “Don’t panic, it’s just a correction. It’s official.”

But what if this “official” correction is really the first leg of an “official” but as yet unrecognized bear market? Then the advice “Don’t panic” isn’t such good advice. In fact, the best advice when the S&P fell below the 2040-70 band, where it had repeatedly bottomed over a 6 month period while failing to make more than marginal new highs, might well have been, “Panic now! Avoid the rush!” Funny. I didn’t see that anywhere at the time.

Maybe it still is the best advice. Don’t get me wrong, I don’t know if it is or not. I have an opinion that I think is informed, but it’s only an opinion. It just seems to me that the advice to “not panic” inherently assumes that the market will never go lower than it is right now, and that we, as non-thinking, Big Media following sheep investors, will never be able to get back into the market either at, below, or–heaven forbid–slightly above current levels.

Since I think this is the first leg of a bear market, I guess I’ll just have to disagree. There really are times when cash is king. It may be an ugly king, but king it is- king of the vultures. They love the stuff.