Bull, Bear or Bust!

You’ve got to know when to hold ’em

Know when to fold ’em

Know when to walk away

Know when to run

“The Gambler” by Kenny Rogers

Kenny is, of course, referring to poker but this could equally apply to what decisions to make about your holdings in stocks, bonds, hedge funds, etc. Is the bottom going to fall out of the markets? Are there better options than buying gold or Swiss francs? Can the euro be protected? Will the need for extreme measures of austerity in Europe cause social unrest on a scale not seen for decades? I don’t know; in fact I have not got the slightest idea!! Now that is honesty for you.

What I do know is that we are in a “roller-coaster market” and you had better strap in or risk being tossed out. I also know how to read the sometimes simple “happenings” around the world which can lead to market movements. Here are a few examples of what you should be watching for:

German Chancellor Angela Merkel is seen giving French President Nicolas Sarkozy a kiss on the cheek at Euro Crisis summit: European markets rise on average 1.3% and the dollar falls 2.7% against the euro.

Greece presents a formal demand to the International Court at The Hague to recover the Elgin Marbles from the British Museum. This is a populist move to take Greek minds off draconian public sector cost cuts. Modest reaction as European markets drop slightly. Greece threatens to leave the Euro Zone and adopt the ancient drachma currency.

Silvio Berlusconi says the level of Italian debt is a “non-issue” and he will personally pay the full amount. Italians are ecstatic and the Borsa Italiana rises by a massive 6% only to fall back 9% the next day on rumors that Berlusconi has only US$1 billion left after paying off all legal demands against him: bunga-bunga!!

The “I’m a Mama for Obama” organization is registering female voters at a record rate but will this have an impact on the US General Election? Dow Jones is unimpressed and remains unchanged.

The Tea Party struggles to decide which Republican horse to back: Mitt or Newt. They don’t much like either but their favorite, Michelle Bachman, remains way down the list at 35 to 1. Dow Jones loses 0.45% with experts blaming the “fact” that absolutely no one knows what either candidate really stands for.

At the UN, President Cristina Fernández makes a formal request to President Piñera to support Argentina’s claim to the Falkland (Malvinas?) Islands. Chile insists this is a bilateral issue. Result: the pound holds steady against the dollar and euro but the FTSE 100 climbs almost 2%. Bolivia, Peru and Venezuela immediately back Argentina’s claim.

China announces it will slow growth for the next five years in a major effort to control rising inflation. Copper futures fall back by a whopping 30%. Chile’s Bolsa drops 15% and is likely to drop further. The Chilean government warns of a serious budget deficit for 2013.

GlaxoSmithKline announces a proven, guaranteed treatment for baldness. GSK stock rises 9% and this pushes the FTSE up 2.3%.

The long awaited Facebook IPO raises an extraordinary US$135 billion making Mark Zuckerberg richer than 65 member countries of the UN. Stock was oversubscribed by 110%!

Spain, an extraordinary sporting nation, fails to retain the Euro Cup. Five days of national mourning are announced with little effect on local markets as unemployment in Spain has already reached 39%. The extra days off will hardly be noticed.

Putin and Medvedev swap jobs (again) after what are called “clean, fair presidential elections” in Russia. Status Quo. Markets stable.

Attempting to appease a nation with 48% inflation and households unable to afford basic services, President Hugo Chávez nationalizes all foreign investment in Venezuela and bans the sale of fossil fuels to the United States. Obama calls Chávez a “lunatic” and threatens to invade. Dow Jones rises almost 3% on rumor of a massive increase in defense contracts.

And so it goes on and on and on….

Watch for the signs; keep your nose close to the ground – like a bloodhound; realize that markets respond as much to rumor as to hard facts. Start a rumor, if you can, and then back it with big bucks. Then sell down just when the truth emerges. Insider trade as much as you can – if you don’t ask the people who really know what is happening, you are completely daft or worse.

I remain cynically aware that market oscillations are inevitable, unpredictable, unkind and unwelcome. My recommendation? Cash in, have the best vacation of your life and bury the rest in the garden.

Santiago Eneldo

(Appreciation and gratitude to santiagoeneldo@yahoo.com )