Hi areokat - I prefer the label "cautious" to "bearish""". Yes, I try to follow the big picture. First a note about my stance.
I firmly believe there is a time to buy, to hold, to sell, and to stand aside. As a macro bias and then adjusted on a stock by stock basis.
Right now I am saying "stand aside". It is not a popular stance. Why? Who on this thread would like it to go up? Ok, rhetorical question, everyone wants it to go up still. Hope and desire are a very bouyant force right now. I also see that the market is hugely volatile which by itself is a signal of a momentum shift.
But in this climate the momentum shift could be one of two things: a reversal of fortune to the upside, or the ground giving way to the downside.
Another reason is that the macro valuation of the basket of stocks that is the market is very very very high. Which means that on average they have to come down a lot. The law of averages is standing firmly against preservation of capital at this time.
Standing against overpriced equities, there is huge risk of inflation and erosion of any capital that is not productively employed. This could turn into a "what loses less" game.
Me, I do not need gains and am biased against capital loss. This sets me apart from many on this thread. Like those over on CCforD learning how to milk covered calls to pay off margin debt.
I wish to avoid losses. I will lose by being long and having the market cave, or being inflated out of cash holdings. An equity value correction can happen in a paralyzingly swift set of gaps. Inflation is at least likely to warn. So I err on the side of caution and stand aside.
There are several HUGE geopolitical and sociological forces driving the macro picture right now. I think the tax cuts are a confidence game. Less substantial than they are being made out. If anything, a surge in sales for Nintendo and burgers and pop (and coffee and donuts) as the average "consumer" lives up to his or her name. But don't expect lasting increased demand on infrastructure as a result.
Interest rate cuts? Liquidity injection? Hmmm... Both are working us to a different point on the supply/demand curve for the US dollar. Higher supply, lower demand. Oops. Although perversely this may actually help to lift the market. Note that in Canada NT is still in double digits because the dollar is worth less :)
The good news is that as much as they won't admit it, the government needs the market to stay afloat.
Problem is, the fight is against something kin to gravity. which wins in the end. My call: Inflation eats cash, revaluation eats prices. Yeuch. The worst of both worlds.
Short term I have been thinking this market will rally fiercely. To a point where people say "whew, I'm a millionaire again and can retire"... and go to cash out all at once (once burned, twice shy). Thus creaming the market in a way that makes where we are just a "correction".
Long winded, but you asked...
John. |
