Market Rotations

It’s interesting to me how the language of the financial markets work and what impact this language has on how I trade (and how you trade). Because, I want to trade better than you… In any case, take ‘rotation’. At the moment ‘rotations’ between sectors or ‘subjects’ change our approach to trading by instigating ‘risk on – risk off’ behavour. Some of the popular catch phrases which got me thinking today: ‘flight to safety’, ‘risk on/off’, ‘safe havens’, ‘smart/dumb money’, ‘QE’, ‘Bernanke Put’, ‘Jackson Hole’, etc. Each little phrase means something to individual investors or traders. Each of these phrases basically say “hey it’s time to rotate into other market areas”. The first one in/out wins. That’s the game.

And by ‘subjects’ I mean for example, our recent focus on the ‘economy’ as apposed to ‘earnings’. Or this disconnect between economists and analysts. I’ve heard that analysts are twice as bullish as economists which seems normal because analysts want you to focus on buying their stocks… Economists want you to focus on political and financial mismanagement. I wouldn’t let one camp soley, influence your trading strategy. Ironically, the fed is perceived as wearing both hats. Might companies looking for stable economic conditions and currently hoarding their cash be sitting square in the center of this mess?

The mini-panic we’re watching and these risk-off rotations into safe havens tend to burn the dumb money. Pure blah, blah… I don’t think I’m dumb money, but I’ve made some dumb decisions! On the other hand, I’ve actually seen some dumber decisions by smart money. That was a distraction…

If companies won’t hire, analysts just want to keep their jobs, investors won’t take a risk, and economists say we’re on the road to ruin why don’t we all just buy a plot of land and start growing carrots?

A cynic would say we can leave it to the PR firms and politicians, they’ll help us ‘kick the can down the road’, and I won’t have to plant carrots for a few more years.

An optimist would say something optimistic. Maybe that’s exactly what the market needs.