Hi Peter,
Always darkest before Dawn?
It seems as though the financial press is bent on talking the market down along with the economy. I don't like the lay-offs any more than anyone else. Just as with interest rate cuts the lay-offs will have an effect sometime in the future, but it's hard to guess when. The good news is that the cutting of the companies involved will certainly make a change in their SG&A after the hit is taken. The bad news is the trickle down effect on consumer durable goods, housing and other areas of the economy. Banks will show a higher rate of non-performing loans, etc.
In talking with a friend of mine recently we discussed what I term "the money pump" (retirement savings of all sorts). He is a wholesaler for one of the larger mutual fund companies with his territory being the mid-west. His business is off from all previous years after growing almost non-stop for a very long time. It's not that "the money pump" has quit running, but that the new money, at the discretion of the individual investors, has been redirected to other products than the usual balanced, growth and aggressive growth offerings. Much more has been flowing to bond and money market funds. If one thinks about the "market timing" aspect of this change, it's a bit like shutting the barn door after the horse had bolted to the next county.
Further we discussed value investing and how the value funds lagged terribly against the momentum and growth types during the last decade. His opinion was that one good year for value funds doesn't make up for a decade of under-performance. (please understand that he doesn't sell much in the way of value funds!) Well, Value may be in vogue, but it's quite late to be looking for the real "values" of a year or more ago. Consequently Value's not what it was and might not even qualify as such any more.
My guess is that people won't change their basic ways just because of a couple of bad quarters. It would take years of crummy markets to get them to give up momentum and/or short term strategies. Well, maybe it will take years to get over the Y2K bubble; I don't know. Markets are funny things. I feel that if there's even a hint that some of the tech wreck is ending, the money will start to flow back in a hurry. This will cause an over-bought temporary condition which will probably then oscillate back to an over-sold one, and so on. This might continue for a year.
So, in order to have something to do in the mean time short of generating a huge capital gain tax liability by "getting liquid," I plan on sitting tight and trading small portions of my equities in whatever range they seem to want to settle. So far this is working okay. Some of my stocks have already this year turned a couple of "round trips" from buys to sells and now back to buys. This may be all I can do for the interim. At least I'm able to collect some 'rent' while I wait for the market to choose a direction.
Thanks for all the articles.
Best regards, Tom |
