Jon,
I hear you on the contrarian thinking, but I see a lot of fundamental reasons one should not get excited about going long here.
1) Bonds yields have backed up in the past few weeks, thus the lows probably have been seen, say hello to higher rates down the road.
2) Tech overcapacity. Q suspending all network build outs for at least a year, Other telecom players reducing CAPEX 20% from this year's levels (Already bad). CSCO routers now being given away for free when you sign up for Sprint's small business plan.
3) No pricing power due to tech overcapacity
4) The government is doing everything it can to prop the markets up, through HUGE liquidity injections and 'dirty tricks' like the elimination of the 30 Year Bond. Fannie Mae and Freddie Mac 'liquifying' the housing market through an aggressive buying of mortgages, etc. Meanwhile the politicians can't pass a 'stimulus' bill.
5) America is back to deficit spending, say goodbye to surpluses (There never was any if you count Social Security). Deficit spending jacks up long term rates.
6) This is a business spending recession that will now spread to the consumer. 0% financing just brought demand in from future periods and will crush the auto makers next year. Once the consumer folds, look out below.
7) Leading indicator industry, the semis, have capacity utilization figures under 50%. We need a lot of demand there, I suspect Semi CAPEX will be even worse next year.
8) Outright fraud being committed by the likes of ENE, and one day people will wake up to the Pro Forma B.S. which means no earnings. The SEC failed and the accounting firms (Art Andersen) failed, where is the credibility?
9) Large historical valuations gaps compared to today's valuations.
The list is long and there are more than the ones I listed. I bought the attacks at the end of September and bailed around 1800. Surely I did not expect this melt-up, but that has been a function of liquidity, IMHO and recent Fed reports show that they have began to soak the liquidity from the system. So, I'm not in the 'crash' camp expecting Naz 1000 and Dow 5000 anytime soon, I am also not in the Bull camp and I think all the good news for the next 6 months have just been priced in. I'm rather neutral, looking for value, and expecting a decent 10%-15% pullback on the indices. EMLX up 400% in three months on flat (at best) earnings for next year, strikes me as being overdone. I'm 100% cash and comfortable.
Cheers,
A-M-S |
