Today we get the "anecdotal" information on the current economic conditions from each of the twelve Federal Districts, we find these reports very useful as they tend not to be sugar-coated and the last BBook release (June 10th) marked a clear top to the the last round of irrational market exuberance when there was no significant improvement in the Fed’s outlook despite the market having rallied 10% in the month leading up to it.
That’s all it takes to pop a bubble – the simple lack of additional air. Members would do well to review the comments of that day as we got a quick read on the Book, which backed up our generally toppy view of the market and we jumped right on POT $105 puts for $1.15 at 2:03 as I had been targeting them as the most ridiculously overpriced stock and my quick read from the Fed confirmed it. POT fell from $117.88 that day to $92.72 on expiration day and bottomed out at $82 on July 13th. This is the way to play the Beige Book, you need to have a premise that is either confirmed or denied by the facts and you can make a play accordingly but you can’t simply REACT to the information, it can quickly be too late by the time you figure out what to do. Having a plan and alternatives based on various outcomes allows you to take advantage of market data as it comes out. That’s why we get so excited when we get our Beige Book!
BBook days are often market movers. This year’s Books came out Jan 14th (down 250), March 4th (up 100 ahead of huge drop) and April 15th (up 100) and June 10th where we went down 130, up 100 and finished the day back down just 24 points. Going back to my June 10th post, I see a lot of similarities, including the China bubble – which I also said was overdone at that time ahead of a 2,000-point pullback that began on the 12th. Oil was $71.50 that morning and it’s "just" $65.50 now and that’s a ray of sunshine if it heads lower. That was also the day I called for a class action suit against GS for their blatant manipulation of the energy markets – something I still have not found a law firm brave enough to take on!