From 52 Week Low To 52 Week High In ....... A Few Weeks?

Yesterday the world was ending and today we hear more gibberish about goldilocks. I don't know how many times I repeat myself but there is no such person and there never will be. Ever. Not with greater awareness. Not with improvements in technology. Not with greater understanding of economics. Never. And while I realize never is a long time and never say never and on and on and on. I do mean never. A fractional banking system, a central bank and human nature amongst other things will always spoil the party at some point. That doesn't mean we won't have parties. We'll likely continue to have lots of great parties. It just means they won't last forever. There will never be a goldilocks economy.

The market has become very volatile for specific sectors. One of them is retail. Recently many were at or near 52 week lows. Bebe, Coach, Target, Wal-mart, A&F, Gap, Urban Outfitters, Guitar Center and on and on and on had been routed. Coach, a tremendous brand as an example, had dropped from near $40 to the mid twenties in about three months. At that pace? Zero in another three months. Yeah, that's sustainable. Now, we whip back in the other direction in a matter of weeks. Some retailers are up 60% in that time frame. 60%! Annualized rate of return of 500% or more! Yeah, that's sustainable too.

So much for efficient market theory. The first thing you should realize is most people on Wall Street don't really know any more than an informed individual investor. If they did, we wouldn't be seeing the market action I am writing about in this post. If they did, we wouldn't have seen stocks lose $13 trillion in value post 2000. The sooner you realize this, the better investor you will become. Why? Because you will start to question the gibberish everyone wants to feed you and start to educate yourself and pick advisors or investments which have a positive track record in good times and bad.

Back to retail. Target has gone from a 52 week low to a 52 week high in a matter of weeks. In the process, it has been rising at an annualized rate of return around 250%. Bear markets are exemplified by fast and furious rallies. But we are not in a bear market you say. Well, only hindsight will tell you the answer to that question but I am more confident than ever this is a topping process for what will likely be a significant top. Why? Not opinions or guesses. Measurements and models. So, what happened with this August to October rally? Well, I'm too lazy to check all of the stocks but I would assume there was a rather healthy short interest accumulated in retail amongst other places. I suspect so because one of my long term holdings went ballistic after being very weak earlier this year. Why? Short interest in the stock built up rather substantially and provided a pleasing reward to short killers.

You must always remember that the Generals are a potent force regardless of whether the market is going up or going down. So, I would guess this rally was about the Generals teaching some hedge funds and brash short sellers a few old tricks. Have the fortunes of Target, a $55 billion retailer, changed enough to warrant a continued assault at this pace? Oh please you know the answer to that.