Doug re: Battapaglia....
Interesting that Pru would send you a Gruntal piece from "Joe Bats" ?
Battapaglia has certainly been among the most bullish; but I am losing some respect here for him of late. This is blatant cheerleading, if not unethical hype; given this rate environment and the blatant "taking money off the table & raising cash" being done by the Institutions.
Merrill for example just issued a common sense call on the Semi's - said to wait for the fall rally and take money off the table then; as they were greatly reducing PE valuation multiples from present levels - given the rising rate environment; becuause :
"A RISING RATE ENVIRONMENT REDUCES THE VALUE OF BOTH PRESENT AND FUTURE EARNINGS"
How the hell can the market be worth Battapaglia's target; with rates where they are now - and where they are going; as opposed to where they were ?
We just had a near 50% correction in many techs and we are still greatly overvalued on any rational historic metrics - and we are "potentially" entering into one of the fastest and steepest rising rate environments in recent market history - along with substantial underlying inflation.
I've just read some incredible analysis on inflation and why the normal indicators that the market keeps wanting to use such as CPI & PPI's are nearly irrelevant - as if it should surprise us that the market would choose the indicator that is most beneficial to its own interests (VBG) ?
We are teetering on the brink of a potential double digit prime rate folks ?!!?!? and we "believe" that DOW 12,000, or Nasdq 5000+ is SUSTAINABLE, or RATIONAL ? - no.
$30+ Crude Oil & $4 Nat Gas, potentially $2 gasoline at the pumps, CRB is rising - rising wages and a still fully employed consumer AND this rate environment do NOT bode well for STOCKS - period.
There is more underlying inflation than many believe and the Fed may maintain a rising rate environment for longer than is generally believed.
Any "Battapaglia-esque" market rally is a "Tradeable" but, not an "investable" rally imho.
Institutions will continually sell these rallies imho. Multiples MUST contract and do so dramatically from present levels - the Nasdq can not go back to 5000 in this rate environment with any "rationality."
If the naz was a speculative bubble at 4000-5000 of late - what will it be with rates perhaps 1.25% higher than they were at those prior levels by year end, or early 2001 ?
Also; given the PE multiples assigned to some of the OSX names - these companies are NOT - "defensive" plays in this rising rate environment - PE's of 60-90 are NOT value plays , not defensive and definitely, NOT bulletproof in an overall market selloff.
But, in this "Tradeable" market, I will add to Oilpatch positions as soon as we see what the Fed is going to do & the market's reaction to it; but as far as the Nasdq & DOW - any rallies are "tradeable", but not "investable" imho as long as we are in a rising rate environment - as imho, the market is still vastly overvalued given the present rate environment.
I will be looking for shorting opps in the NAZ on any major "relief" rally if their is still a bias towards further hikes.
It is near lunacy - to have rates this high as compared to just a year ago; and have market indices perhaps going to new highs per Battapaglia's comments .... it is the epitome of cheerleading and irrationality imo - the underlying fundamental problems at these type of historic multiples are going to set us up for one of those multi-year Bear Markets that's going to educate yet another new generation of investors and traders.
I am a trader in this environment, not an investor; and I will maintian, if not add to defensive plays in Gold & Metals; use tight stops on ALL equities and keep a decent amount of cash (20%+).
I think the E&P side may be more fundamentally valued than the service driller side and their may be some defensive value in dividend paying - single digit, low double digit PE - E&P/Integrated names with good balance sheets, but other than that - even the Oilpatch in a continued rising rate environment should be viewed as "tradeable", but not "investable" - not at PE's of 60-90...
Every single historic "Danger & Warning" sign ever assigned to the markets is now flashing... all of them.
Heavy margin use in virtually any sector in this environment is begging for trouble.
I still like Gold & Metal Stocks, both as an offensive & as a defensive play and 6% cash returns are not bad here; have to keep some cash here as well.
A very rational case in this rate environment can be made for Dow 8800 and Naz 2000 imho... history; learn from it, or be destined to repeat it. The overall market at those levels would not be undervalued in "this rate environment".
I've made a lot of money during the last year - and the market AINT getting it back (VBG). |
