Wednesday, September 30, 2015

Who Gets The Last Laugh on Stocks?

Myles Udland of Business Insider reports, Bill Gross is literally laughing at the stock market:
Bill Gross is literally laughing at the stock market.

In a tweet on Tuesday morning, Janus Capital's Bill Gross said: "Stock market refrain from a few months ago: "Where else are you gonna put your money?" LOL ... Ever considered cash?"

Put another way, Gross is laughing at people who invested in the stock market because there was nothing else to invest in.

Folks who have been reading Gross' investment updates over the past year or so most likely know that Gross would prefer holding cash to being invested in the stock market — or almost anything else.

Early in September, Gross' monthly missive basically said everything sucked.

Gross wrote:
Global fiscal (and monetary) policy is not now constructive nor growth enhancing, nor is it likely to be. If that be the case, then equity market capital gains and future returns are likely to be limited if not downward sloping. High quality global bond markets offer little reward relative to durational risk. Private equity and hedge related returns cannot long prosper if global growth remains anemic. Cash or better yet "near cash" such as 1-2 year corporate bonds are my best idea of appropriate risks/reward investments. The reward is not much, but as Will Rogers once said during the Great Depression – "I'm not so much concerned about the return on my money as the return of my money."
Early Tuesday, stocks were falling after getting crushed on Monday.
I guess we can add the former bond king to a growing list of investment gurus warning of a looming catastrophe ahead. The only problem is the stock market is laughing right back at Bill Gross and other doomsayers.

In fact, ever notice how every time we get a big pullback in stocks you get all these dire warnings from gurus that the worst is yet to come? Sure, stocks are getting clobbered and some sectors like biotech just experienced a real drubbing in Q3 but if you ask me, it's better to ignore these dire warnings from eminent "investment gurus" and remember the wise words of the late comic genius George Carlin: "It's all bullshit and it's bad for you!".

That's right folks, there is so much nonsense and misinformation being spread out there from informed sources that it's no wonder many retail and institutional investors are having a hard time navigating through these volatile markets. And some of the best and brightest are taking a real beating this year.

Take the time to read my recent comment on the looming catastrophe ahead.  I cleaned up some typos and dates I got wrong but my message remains the same. In fact, I was listening to Jim Cramer on CNBC this morning (cynics call him the king of bullshit but he has spurts of great insights) and he made a few excellent points on how Tuesday was the fiscal year-end for mutual funds and many sold stocks for tax reasons and how these markets are highly illiquid, exacerbating downside moves.

What else? Tim O'Neill, Goldman Sachs' partner and global co-head of the investment management division, has a warning: If passive investing gets too big, then the stock market won't work.

I should know, I trade biotech stocks and have seen huge and unbelievable downside moves which makes me highly suspicious that either Fidelity (the biggest biotech investor in the world) is playing games here to "shake out weak hands" or there was some big hedge funds suffering from redemptions and forced to close out their big leveraged biotech bets. Either way, I'm not panicking here and prefer to sit tight and ride out this storm.

On Wednesday, things are looking much better. Sure, we're heading into the dreaded month of October but I'm confident the worst is behind us, especially in the biotech sector which everyone now loves to hate. Pay close attention to the iShares Nasdaq Biotechnology (IBB) and the SPDR S&P Biotech ETF (XBI) as I think they are going to bounce big from these way oversold levels once these markets stabilize (click on images):



Keep in mind the former is made up of large biotech stocks and leads the latter which is made up of smaller biotech stocks and is thus a lot more volatile. The same goes for the ALPS Medical Breakthroughs ETF (SBIO). It too is made of small cap biotech shares which swing like crazy (all biotech stocks are definitely not for the faint of heart).

Below, I list a few small biotech companies I track and trade. Some are way oversold and look terrible from a technical point of view but I'm confident many will recover from the latest biotech bloodbath (click on image):


There are plenty more but the truth is this sector just experienced a good thrashing and it scared the crap out of many investors. Still, if you think the rout in biotech is awful, check out the carnage in energy (XLE) and metals and mining shares (XME) or even in top hedge fund picks like Sun Edison (SUNE). OUCH!!

Below, CNBC's Brian Sullivan looks at how much market cap has been lost by the big oil companies during the commodities crush. In his latest comment, We’ve Seen This Picture Before—–Global Markets Down $13 Trillion Already, David Stockman warns the worst is yet to come.

I prefer listening to the ageless wisdom of George Carlin than all these so-called investment experts.  He nails it in the clip below and if you need a good laugh to get your mind off markets, watch it.


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