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Red Thumbs: Not yet...



May 04, 2009 – Comments (3) | RELATED TICKERS: TPR , CSCO , APOL

In response to :

reply: to OutOfFocus: Gentlemen, Start your red thumbs..


Excellent post. It indeed educated me, and will put me on high alert (avoid being an idiot)

Here's the deal. You haven't provided a single reason why you consider 7700+ as a cut-off for idiots to enter. Maybe that cut-off is 9000, maybe 11000+. How do you know its  7700.


Also, have you ever considered the fact that people who bought it at the recent bottom (like I did a few) were not innovators but just plain random lucky. I don't consider myself a market predictor just because I managed to buy a few stocks at the bottom. Well if I was, I wouldn't be the idiot who bought all of 2008.

In any case, only time will tell whether the people who are still buying are idiots, or those sitting on the sidelines are idiots. Its a toss off, so either way, you cannot really prove one is smarter than the other. Real smartness comes from consistent performance over long run.

I disagree that this is a suckers rally or bear market rally. I feel market is throwing mixed signals. While some companies that I like and follow are way over bought, actual verdict on them really depends on the answer to this question, "are we really in a recovery?"

If i ask any small businessman, he says, it will atleast take another year to recover. However, if I review results of companies, I find that in some instances, sales have fallen only 5-10%. You cannot really manipulate sales like you can manipulate EPS. There are many many companies that have recently reported encouraging sales. Not massive growths, but indeed shown improvement. These are the same companies that had worse previous quarters (as compared to same quarter in previous years). So I am making an Apple to Apple comparison.


Sure, there are reasons for why each one reported good earnings or reasonably earnings, earnings/sales that I see as signs of economic recovery perhaps? Sure, I don't really believe in any of the financial stocks yet, but I do believe there is a slight bit chance that perhaps top fools like EverydayInvestor, GMX etc are wrong, and up and comers like UltraLong are actually right?

I will just urge top fools to blog and more aggresively put forward their bearish or bullish case if indeed they are so convinced.

As for now, I am not an innovator, but I feel, maybe, just maybe markets were too oversold on March 6th, and mayb just maybe, investors decided to unleash their cash horde and make some long term bets. Even the best here will concede that stocks priced on March 6th or 9th were ridiculously low. I know for a fact that if I didn't go all-in on March 6th, it was because I was greedy. I wanted them cheaper. Sometimes, if you try to be uncle scrooge, you get nothing. Sometimes, you have to payup for quality or lose the chance to get that price forever.

March 6th 2009 was when markets hit a 10 year low. Have can top fools ignore that fact? Is the U.S economy so bad? Come on.


3 Comments – Post Your Own

#1) On May 05, 2009 at 7:44 AM, outoffocus (24.06) wrote:

Thanks Hudda.  I'm actually quite flattered that my blog post sparked such a debate.  I also appreciate that we are able to see both sides of the argument.  However, I think that the various posts written by me, GMX, Dwot, Jgus, Binve, and others outline my argument enough that I don't need to reiterate my position.  At this point, only time will tell who is correct. Either way this is an interesting debate. 


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#2) On May 05, 2009 at 10:08 AM, huddaman (99.24) wrote:

hi OutOfFocus

 Another way to look at it is, maybe GMX etc have missed the bottom and are now so desperate to see it again. Nobody likes to miss an opportunity that knocks your door just once in a lifetime. Unfortunately, its come and gone. I wish it comes again too, because if it comes again, I will take full advantage of it. But with the wild swings in the market and fast paced environment, who knows, a phenomenon which was supposed to occur once in 50 years might recur every few years. 

 If we are in a recovery, then the recent rally is nothing, we will see more moves and in big ways until we arrive at the next bubble. If people have jumped the gun, then there will be modest pullback and everyone will be looking out for smallest amount of positive news, enough to give a 5% boost everytime that happens.



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#3) On May 05, 2009 at 11:59 AM, outoffocus (24.06) wrote:

Well I cannot speak for GMX, but personally I'm not hoping for a new bottom.  I posted my blog because I firmly believe that we are in for tougher times ahead.  In real life my portfolio is 100% long because I invest more for the long term, so I would love to see an economic recovery this year.  But on the other hand I'm also a realist.  I've been paying attention to all the economic data that has been presented and I dont see an economic recovery coming this year.  There are too many shoes that still havent dropped. 

  Also, it seems like all this buying over the last 2 months have been based on a (media-fueled) overly-hyped hope that the economy will recover this year.   I'm not denying that the market was oversold in february (If you check my post I never implied that the market wasn't oversold).  However we are talking about an almost 2000 point jump in 2 months.  That is unrealistic. Even if the economy was recovering, the market should not move up that fast.  I feel that once the DOW past 7700  we were entering into the "overbought" territory based on overall economic fundamentals. 

Simple fact is, there are still alot of inefficiencies that need to be fully corrected out of the economy and history has proven that these corrections often overshoot to the downside before a full recovery.   Until all the shoes drop and we have that final overshoot to the downside, I'm not convinced that we've finally hit bottom.  I think Statsgeek probably explains my position the best on why we havent hit bottom.

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