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February 25, 2018 | Shouldn’t We Be Doing What Buffett Is Doing?

Rick Ackerman

Rick Ackerman is the editor of Rick’s Picks, an online service geared to traders of stocks, options, index futures and commodities. His detailed trading strategies have appeared since the early 1990s in Black Box Forecasts, a newsletter he founded that originally was geared to professional option traders. Barron’s once labeled him an “intrepid trader” in a headline that alluded to his key role in solving a notorious pill-tampering case. He received a $200,000 reward when a conviction resulted, and the story was retold on TV’s FBI: The Untold Story. His professional background includes 12 years as a market maker in the pits of the Pacific Coast Exchange, three as an investigator with renowned San Francisco private eye Hal Lipset, seven as a reporter and newspaper editor, three as a columnist for the Sunday San Francisco Examiner, and two decades as a contributor to publications ranging from Barron’s to The Antiquarian Bookman to Fleet Street Letter and Utne Reader.

If Warren Buffett is loading up on Treasury bills, shouldn’t we be doing the same? Berkshire Hathaway reportedly held $109 billion in cash at the end of September, according to the Wall Street Journal. That’s double what the legendary investment firm had in 2006 and up from $86 billion at the end of 2016. Even with Berkshire’s huge hoard of capital, that wouldn’t leave much spare cash to throw at the likes of Netflix, Amazon, Facebook, Google and Microsoft. For our part, we’re taking a very cautiously optimistic view of the stock market, which could conceivably recoup all of this month’s earlier losses by week’s end.

Why do we view this nine-year-old bull market ‘very cautiously’?  It’s not because of the charts, which in theory support the case for much higher prices. No, it’s more a matter of our distrust of Mr. Market and respect for what he can do when sentiment is at such bullish extremes as it is now.  It is for that reason that Rick’s Picks will be diligently focused on Hidden Pivot rally targets of intermediate degree just above the old record highs. Even the lesser charts, most particularly the hourly, have the potential to warn of a major reversal, since small, abcd corrective patterns will start to exceed their d targets if trouble is brewing.

Mr. Market’s Kill Shot

We still think that a pop in the Dow, S&Ps and Nasdaq to marginal new all-time highs would be the perfect way for Mr. Market to set up bulls and bears alike for the kill shot. We note that some well-respected seers are now calling for the Dow to ascend to 50,000 or even higher.  Far be it from us to suggest this is impossible. Even so, we’ll continue to use our own technical tools to measure the likelihood of a bullish supernova each step of the way.  We will be especially wary if stocks recover from their early-February plunge as soon as this week or next. That kind of ebullience invites close scrutiny and increasing skepticism toward the headlines that inevitably will support it.

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February 25th, 2018

Posted In: Rick's Picks

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