TP, RE: Do you see a scenario where stocks without earnings implode but the rest of the market recovers? Or is there enough linkage via margin debt and general GNP that a sever tankage in one rather large sector takes down the whole market for a long term (several year) resession?
There's a lot of evidence out there that stock picking can insulate you. Most recently, when the biotech bubble collapsed in the early/mid 90's, the rest of the market was just fine. Similarly, when the tech stocks went into a true nuclear winter starting in 1983 (when valuations were just about as absurd as 'Net stocks are now), the rest of the market sprinted ahead. (Trivia note: how many people out there realize that INTC's total return from 1983-1989 was zero?) Finally, when the entire market was in one of the most extended bears ever in the 70's, the strong fundamentals of the energy industry generated outstanding returns.
On the other side of the coin, the economy in general is much, MUCH more dependent on the equity markets now than it was in the historical periods I cited above. That worries me, too. My net equity exposure right now is 0, with an equal number of longs and shorts. (It's been that way for a couple of years now, though, so don't assign any immediacy based upon that exposure.) |
