Wall Street in Flip-Flops...Again

I have written before that I sometimes find the folks on Wall Street to be a comedy of sorts. Today I have this same sentiment based on the news on the Street that today ended a four-day rally because, of all things, the folks on Wall Street were frazzled that just maybe the economy is weaker than they thought.

Just yesterday the DOW rallied triple digits on the news that Larry Summers would not be in contention to be the replacement for current Fed Chairman Ben Bernanke. Instead it looks more likely that Janet Yallen will replace him. If Larry Summers would have been the top successor he would likely have decided to taper the bond buying program currently in place by the Fed. Janet Yallen, however, is more likely to continue it.

To the folks on Wall Street this came as a relief yesterday. Thus the rally.

But, and I have said this before, tapering would in fact be a stronger economic development than not tapering. So what's the surprise on the street that the economy is not as strong as anyone thought?

One word. Duh. That is why quantitative easing is currently the position of the Fed. It is because the belief is by the Fed that the economy needs to be artificially propped up. It needs to be stimulated by low interest rates, and the bond buying program helps to accomplish that.

Perhaps I am missing something, but my take is that tapering should actually have the effect on the markets, that quantitative easing continuing seems to have had originally. The markets, and their underlying businesses would have a much better shot at gains and growth if more Americans are working, more Americans are spending, and when consumer confidence shows signs of improving. All of these things are lacking, thus the Fed continues to see quantitative easing as a means to hold things up in the interim. That is inherently a sign that the economy is weaker.

Still, I don't think today's move really means much. I just felt an urge to state the comedy of it. Yesterday the Street jumped for joy that the economy was crappy enough to warrant continuing easing. Today they sold off because they felt the economy was the obvious same level of crappy enough it was yesterday to hurt their investments.

It just leaves me scratching my head is all.

Markets Ugly, But Enticing

So the markets continue to free fall. So what? That's my sentiment. Really. So freaking what? The fact remains, as I see it, that the markets are simply pulling triggers out of nervousness, but the fundamentals remain strong. So without sounding like I am beating a dead horse...so what???

I actually look for opportunities like this and I buy heavily into them. Wall Street likes to panic. They do this often. It's almost comical, actually, when you read the news of the day each and every day on the markets and watch how these guys react to things. One day its all good. Housing starts up 30%, the markets soar. The next day, consumer confidence drops 0.5%, market drops.

These guys look for reasons to pull the trigger in either direction. They are like birds eating, really. You know what I mean? Have you ever watched a bird eating? Their heads dart to and fro, back and forth, almost frantically. They take a couple of pecks of food. They repeat their frantic darts. The wind picks up speed, tivckles their wings, and their off.

But the wind is not a predator. It's just a wind!

So, that's what I do. I sell puts and calls, and buy stocks despite what the markets overall are doing. And I have to say it works. I don't panic. I am steady as she goes. Besides, the smart investor doesn't buy or sell a market. A smart investor buys or sells a company.

And right now, there are a lot of great companies that went on sale, and continue to be discounted more. Continue doing what you are doing guys. I know the wind from a predator, and while you fly away at the slight tickle of a breeze, I'll stick around and eat the seeds you left behind.

The Markets Are Not Rattling Me, Still

I said yesterday that I did not believe that the announcement by the Fed was a negative for the economy, and despite today's even sharper decline of over 350 points, and like effects happening in other markets across the globe over the Fed's comments, I stand by what I said.

The declines in the markets are an overreaction, and I think the trend that the Fed is indicating is a positive one, not a negative one.

Sure, interest rates did infact rise to a two-year high. But the dollar also rose, and based on the most basic things, I think these are signs of a strengthening of the economy. Not a weakening. Granted, the interest rate hike is not due to the Fed, but rather due to market reaction to the Fed, and certainly the Fed raising interest rates would signal growth in the economy needs to be slowed down (a positive sign), but this is again, just a reaction.

The fundamentals are strong. The markets are overreacting. There is nothing to see here.

I am still a buyer. As I said two days ago, I am cautiously optimistic. I remain so. I can't control the impulse of big players on Wall Street to sell off their stocks and send the markets into a freefall. But I can control my targeted response, which is to react contrary to their negative, and buy into their frantic frenzy to sell.

Shares of my favorite companies are on sale. Shares of companies I have been waiting to buy that were overpriced are coming into target buy territory. I don't see any fundamental reason for the selloff. If the economy improves then the Fed will change course. How is that a negative? If the Fed is suggesting that the efforts it has been employing to prop up a poor economy may soon not be needed, how is that a negative? If the training wheels are not necessary, how is this a negative?

I'm not buying into the idea of the selloff. But you can bet your ass I am buying into the unfounded frenzy that's causing stocks to go on sale. The sharp declines cannot continue contrary to the fundamentals, and that means gains for anyone who is going to buy into this much needed dip in the markets.