Things may be bad, but we won't have a correction....
June 13, 2011
– Comments (20) |
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The Dow is down about 8%. The definition of a correction varies slightly, but there seems to be concensus that it's a dorp of 10-20% in a relatively "short period of time".
Since I'm a PermaBull in a depressed mooooooood....I'll take my loophold if needed, but I don't think I'll need to split hairs on the period of time.
IN several comments/pitches I've called for a down cycle. Unfortunately, I'm not good at making money on my "gut" down calls. I do make 1-3 calls on Bear ETF's here on CAPS for any day the DOW is down 100+ points. Some "FOOLS" call ETF's cheating, but I call it marking the levels or dropping some bread crumbs that I can pick back up some day in the future and have a sense for "where we are at" and where we've been. I do find some high beta equitie to "put", but again not with the conviction I should have.
I spent most of the weekend pondering how much further down we might go. I was actually rooting for a much harder down day on Friday. This six week down cycle could use a really hard "capitulation" day, but by metrics we didn't quite get it. I don't have any scientific data, but I'm looking at another down spread out over a few weeks of at most 3%.....more likely some oscillations pretty near where we are now with a few down days interspersed with buying days. I think tomorrow, Tuesday, will be a buyers day and we will close the week up, breaking the six week drag.
Fundamentally, we're in a mess. Nothing has changed to speak of since my gut was calling it down. Economic data will be weak for awhile. The rose has faded considerably the last few weeks as negative news finally moves the markets into a negative (down) direction. Still, if you want to live life in negativity, you all have Alstry for that. You too, if you want to be depressed enough can spend two years with your money in a mattress while you missed the biggest rally in your life time and then "milk" nickels off of anyone you can "steer" to your website with links to "sour milk" with "udderly" useless, out of context headlines.
I think we're in for a long summer. I'm pretty much against there being a double dip and I've ruled that out of my investing thesis. I also don't see much more down than up in general. Overall there is still money moving into the market. Banks/Investment firms continue to manipulate it and report out how they take the money from the rest of us on a daily basis. While things are not as great as people, (especially those who will be trying to get reelected) would like us to think we are still holding our own and baby steps forward are out numbering those backwards.
I think the FED will continue providing some promise. The government, especially the President will talk things up. Unemployment may have stopped dropping on the last report, but it's still better than it was two years ago by almost a full percent. People are still spending. Hard to say if oil keep below $100 and what the value of the EURO, China, US dollar will do.
Yes, pick any metric you want and we have "problems". The Earthquake in Japan was as big of a problem as you are going to find and we didn't predict that one in our whining. The supply/demand issues are just starting to manifest as the little buffer we had continues to be used up and recovery remains slow.
I was 100% cash in my retirement the last six weeks. I went 15% back in COB Friday. I still don't have a feel that the risk reward is much better than when I jumped out. My premise when I moved it to cash was that the best the markets might gain was 2-3% while I was "benched"...the most they could loose.....?? We'll I'm a perma-bull, but I wouldn't have been surprised at 15% total. In my trading account I'm looking for bargains, but again, I can't get much conviction, but there are a few that are 15-20% cheaper than they were a few weeks ago.
I think we're in a new phase. The "junk" is finally becoming less tasteful to the speculators. The company's that hide thier loses in huge cutbacks, drops in inventory, aggressive receivable collections, refinancing and any other tool they could find are running out of pockets. You can can trim fat from pretty much any budget, but there are limits if you're a business producing new products, stocking what customers want, and giving them the service they are use to.
Equities with outlandish Forward P/E's are also starting to correct. There are few company's with sustainable margins and a moat that warrant the buy-in and several have taken 10-20% one day drops after earnings and weak guidance.
I think we have some bargains showing up. I think they will be found in company's that were not as heavily speculated on the last year.
Part of what makes me think we might be bottoming is that while I didn't see capitulation this past Friday..I do see some of the Top Fools gaming by upthumbing BEAR ETF's and downthumbing BULLS. Those who think using ETF's are cheating didn't notice or don't recall the top fools who got stuck bag holding their BEAR calls with ETF's. If the market drops sharply then those ETF"s are clearly a good play that will net you quick points/accuracy. IF the drop is not quick the decay will eat you before they drift into close range. My bottom call is partially seeing the "capitulating" thumbs here on CAPS. One thing I've learned about trying to call the market.......it will make sure you are wrong more times than you are right!
Disclaimer, if I knew anything, would I be posting here? ;)
Signed a PermaBull wondering whether to wake up from his summer nap and roam around a little or if he should go back to sleep for the rest of the summer!
TSIF (The Sky is not Falling Today...but Tomorrow's another day).
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