Big Dog re: Institutions & cash...
Big; I think Funds have raised all the cash that they can, prior to the Fed Meeting in June - and will then deploy on the potential post Fed selloff. It's not the % that matters - it's the total $ amount.
If every single mutual fund in the market took just 5 % off the table here - the market would certainly tank by an exponentially greater degree than 5%. A 3-5-7% move to greater cash makes a huge impact in the market.
I would bet that many are at near max cash levels via their individual charters.
Additionally, all those Institutional Investors who do not have any cash restrictions are raising lots of cash here and selling the rallies. The tape shows it clearly - lower lows off of each Naz rally; up 100 - down 125; up 50 - down 75 etc.
Lots of media talk today that this is end of month - tape painting on the NAZ.
Trading this market of late involves more "art" (read gut feeling) than "Science" (read TA/FA) as reading the sentiment of the traders, recognizing the duplicity of the pundits and reacting to the "do as they do - not as they say" mode that the Street is in - taking a contrarian mindset; has been most profitable.
I like the oilpatch long - real long, but I see a hell of a lot of risk for profit taking/defensive selling in the next 3-4 weeks.
1. OPEC "WILL" raise production - 80-90%+ odds imho.
2. FED "WILL" hike again - we can not & will not maintain record market multiple valuations into the highest & fastest rising rate environment in a decade - can't & won't continue...
3. Julian Robertson, Soros, Buffet, Shopkorn - the equivalent of Mantle, Mays, Yaz & Clemente - all hanging up their spikes; or in Buffet's case - playing an incredibly defensive Silver position & refusing to play tech at all, openly calling it a bubble.
I'll stay about 35% invested in the oilpatch with some short term trades taking me to 65% perhaps; but I want to buy the dip post the Fed & OPEC meetings - from any overall market weakness. IF there isn't one; I don't think anything outruns me between earnings period and off of the probable retrace in Crude Oil and I still have small caps, integrateds & the Oil Majors to play...
SII CAM BJS ESV RDC WFT - near the highs, of prior cycle with what ? - 1/3rd of their prior earnings ?
Sure; unquestionably - their outlook is to "potentially & ultimately" surpass those prior peak cycle earnings as this expansion should surpass 97-98; but "potentially & ultimately" - will not; support these valuation multiples into a total market selloff.
OSX 100 can easilly be a 72 hour event if we get some inflationary CPI PPI info & the Fed hikes with a negative forward bias - simultaneous to an OPEC production increase.
If we get a real major blow off in the DOW & NAZ; the OSX is fairly valued at 85ish on "present & short term" fundamentals - and in a general market blow off - no one is going to pay any premium ANYWHERE in this market for "potential" down the road expectations....
remember JUNE 1998 - companies were earning 3 times what they are today people and the bottom fell out - downdraft that wouldn't stop .... the Big Oils & Integrated's have yet to participate here - that is speaking volumes - that tells me that the Big-Old Institutional Money has not bought into the longterm sustainability of Crude at these prices, or the valuations here being exceptionally cheap on present fundamentals.
The OSX & Independant E&P's have a huge amount of short-term profit that can get taken off the table, by the more momenteum oriented players here; in a heartbeat on any negative turn of events. Remember how fast the E&P's fell - just last Sept ?
Absolutely insanity to be on margin going into the Fed & OPEC meeting - CASH will be either an offensive, or defensive weapon and if I am right - it will be both...
Risk vs. Reward .... is the entire story here.
Between earnings periods - into both an OPEC & a Fed meeting; being margined ? - no way.
Buy 'em cheaper later - after the smoke settles.... come in and pick the meat off of the bones later imo.
Profits & Buying Power;I got it & they aint getting it back .
Per CNBC just now; OECD says FED must hike another .75bp this summer alone; Nat West says over anther 1% coming...$30+ crude, gasolines near $2, consumers may be spending less at Kmart - but, just rotating the money to the pump, huge wage pressure, industry paying more for virtually every comoodity - will have to raise prices from both wage & commodity pressures... I just can't see any reason not to be conservative here - none at all.
I am selling all the rest of my tech into this rally - except caught some QCOM and set trailing buy limts for 2 more 10% down moves if seen - me buying QCOM - whodathunkit ? - if there is a real rally here - I allready have my profits and QCOM is a major outperform- bouncer; but for now , I am selling everything else.
We can not and will not maintain near historic high valuation multiples into a near historically swift and decade high, rising rate environment - not in tech, not in the Oilpatch - not anywere.
Anyone care to tell me what a double digit prime rate will do ?
Does anyone realize how close we are to that ?
Thru this year; I played some major margin leveraged sector moves in the Oilpatch like many here & margined the intitial Naz bounce, traded the sell the rally - buy the dips since; but am no longer a leveraged player. Made enough money in both tech & the patch; that I am only interested in stepping back in to buy significant "capitulation" types of selloffs, or pullbacks. Otherwise, not willing to let more than 35-50% of it ride...and I am willing to stay no more than 35-50% invested thru year end, or longer if need be - untill I see a clear end to inflation and the fed hikes - period.
Cash is King imo.
PS - if today's NAZ rally blows off late in the day, or we see another down day tomorrow - run for the hills in tech.
We need a 2-3 day sustained high volume rally for there to be any significant change in what the Street is doing vs. what they are saying.... for now; they are saying - buy and they are doing - sell... |
