STUCK IN THE MARKETS

I found a nice little honeycomb washed off the tree. It had come unstuck. HONEYCOMB

Stuck is the situation most people are in. Stuck to their mortgages, stuck to their investments, stuck to their jobs, just stuck.

Investments are mostly stuck right now because everything is just plain uncertain and the market has been stuck in a semi reluctant risk on mode for the past 1 month since the end of the shut down debacle.

Volumes say the most and stock market volumes have never been so bad that we look set to hit 15 year lows in quarterly volumes for the S&P 500.

s&p500 volumes

And the US Investor Sentiment Bullish Index which polls the risk sentiments of individual investors is not showing much signs of bullishness, registering a 2 month low in weekly reading not seen since Aug while the Bearish Sentiment Index is rising to challenge its Shut-down high.

AAII INVESTOR SENTIMENT BULLISH INDEX

My broker was telling me that this month he sees his lowest take in a long time, not since 2009-2010 period. The penny stock players have vanished, all stuck with positions that they cannot exit until the next ramp up which could be in the works for year end. Until then, it is pointless for them to sell because it could move the market by tens of percent for the volumes have dried up.

Fund manager friends tell me that they cannot sell, too, for the same stuck reasons for the positions are too big to move and 1 sale could affect the rest of their portfolio which they are not willing to risk. Besides there are no viable or compelling alternatives for them to buy into at the moment and they are too bulky to switch into another stock unless they find a willing party to swap holdings with them.

If I use Caterpillar as the benchmark of the world, being one of the Dow 30 components and having no other comparable in terms heavy equipment for global infrastructure development, we see a red flag waving at out faces with their poor earnings outlook and capex warnings. Stock price looks pretty stale and now they are being accused of dumping train parts into the ocean to bill for additional repairs. http://online.wsj.com/news/articles/SB10001424052702304607104579212410752833816

caterpillar

Wouldn’t it be smarter of them to just do the regular stock buy back ?

Central banks are just as stuck in their commitment to ease and that is turning out to be a hostage situation to the next economic number or market weakness. Bonds are turning out to be the biggest sinking boat as banks freeze their balance sheets for Basel 3 and so far, managed to dump holdings onto the retail investor and bond funds. The bond trade is starting to look as ungainly as an albatross on land.

Market behaviour is an art, not a science and we have quite a prisoner’s dilemma or Catch 22 situation in our hands. No one dares to pull any plugs. But I don’t think anyone likes being stuck too. And when it does come unstuck, we only have a washed out honeycomb to show.