Hi, Jay,
re "What do you think the correct allocation and approach to the voyage is?"
I range-traded all through 2001, and I will continue doing so. I bought the big dips, and vigorously sold the following rallies. Worked very well, and I will continue doing the same in 2002. Almost all of my long positions are techs I bought in September and October 2001.
I heard someone (forget who) say: "for stocks in 2002, liquidity will create a floor, and valuations will create a ceiling".
I can see not-small chances of realistic scenarios for Naz below 1000 or above 3000 in 2002:
Nas below 1000: investors are treated to a series of Argentinas and Enrons in 2002, culminating in a dirty suitcase bomb making a major American city uninhabitable. Consumer spending in 2002 does what business spending did in 2000 (falling off a cliff). The savings rate goes strongly positive, housing prices in 2002-2003 do what telecom-equip stock prices did in 2000-2001.
Nas above 3000: The Bubble is back: liquidity and low interest rates persist, consumer spending rebounds strongly, pricing power returns to corporations (but not enough that inflation becomes a worry). The War goes well. Europe and Japan lag the U.S. recovery, and so dollar-denominated assets continue to attract capital. Overleveraged consumers, corporations, and governments, just get more overleveraged, and the party on Wall Street resumes.
At the moment, I am 2/3 long stocks, mainly tech, almost entirely positions I bought in the September/October panic-selling. I am 1/3 cash and shorts, a proportion that will increase (I've been waiting to sell until the new tax year). I will make a major purchase of NEM (leveraged gold play) if it hits 14. I will make a major purchase of oil-service stocks, if oil hits 10$. No techs are on my buy-list, at current prices. Nibble on AMAT below 35, QCOM below 40. I have no plans to buy GX (stock, bonds, anything), as I see telcos (other than wireless) as a sector where overcapacity will persist into 2003 or later, and the process of corporate deleveraging (through Chapter 11) still has a ways to go.
You are right, I am "fudging and hedging". I'm scepical of my ability to guess at 2002 trends, and very sceptical for anything further out. I have a list of RedFlags that would make me exit most long positions:
Message 16853807
I am a "weak hand", easily convinced to sell, all positions tentative. I expect 2002 to be just as interesting as 2001. |
