I keep thinking that Wiley Coyote moment is coming, but I always seem to end up being wrong. I'm so tired of this market pattern I could puke. I really have no interest in trying to time this month's move or that month's move; all I really want to do is prepare for a mean-reversion - a reality check - that used to come periodically - before the 1980s, that is.
Through the bull, all one had to do was recognize that the bull market could go higher, and select stocks with promising growth prospects. The economy really didn't have a whole lot of structural issues, despite worries about Asia or rising debt levels. When a recession would come along, stocks would fall predictably, and those who were liquid could take advantage of it. A few years into the next cyclical bull, it was easy to step aside and book profits. There was no unstable bubble. Life was good.
Then the problems really started in 1995. It was obvious within a few years that a stock market bubble was underway. I knew enough not to fight it; I even had the sense to play along right up until the crazy peak around Y2K. Then I felt the odds had shifted in favor of the secular bear. Since then, investing has ceased being fun.
To my utter amazement, the economy avoided virtually any fallout from the stock bubble. I made money as the market fell initially, but I've given much of it back trying to repeatedly position for an assumed resumption of the secular bear. I thought the Iraq war might kick it back into gear, then in 2004 I thought rising interest rates would tank the economy. In 2005, I thought the market might be anticipating the end of the real estate bubble, and then later I thought it might have noticed that the real estate bubble had in fact peaked. Now, in 2006, I thought maybe, just maybe the market was beginning to notice that the real estate bubble was imploding. However, it seems that the market thinks the implosion is already done. I've tried to re-establish short exposure five times now I think, and I've been wrong every time.
It's not that I'm a permabear. I simply can't find anything I'm interested in on the long side here. There just isn't anything that I have any degree of confidence will be higher in 3-5 years from now. I do see plenty of things that I think will be substantially lower in 3-5 years, though, so I'm compelled to short them.
In housing stocks, I know the value players are now trying to catch the falling knife. I'm just amazed at the forward PEs on these, largely due to the fact that their prices are now back in the 2005 ranges for many of them. And the cap equipment suppliers to them - good grief, they're almost at alltime highs! Even if housing did bottom, the builders should have enough cap equipment to last for many, many years.
And so much for the consumer-led recession. Look at retail sales - UFB. I guess I missed some source of funding for this. Where is the money coming from?
I hate being wrong. Is it ego? No, not really. It's just that every time I'm wrong, it costs me money. And I've been wrong a lot more than right lately. There just seems to be no consequences from the dominoes that fall yet.
Am I bitter? Just a tad. I'm sick and tired of watching PigMen playing with Other People's Money, with risk-free no-lose propositions: make 20% of any profits, but don't participate in any losses. It's a system designed to fail. The only thing more foolish is the fact that I didn't rush out and start my own hedge fund.
So I ask you - how can I quit being wrong? Is there any better way to figure out if the economy is weakening for real? I can complain ad nauseam about the ridiculous prices on many stocks, and the implausible scenarios that must be assumed to make them a rational investment, but for all that the simple fact remains: I've been wrong about the economy, corporate profits, and consumer spending for so long now that I can't remember what it feels like to be right. If I could just get a better grasp on those, I wouldn't lose so much darned money. Heck, I might even make a buck here or there like I used to in the good ol' days...
Sorry for the rant. If you haven't guessed, I've been forced to throw in the towel on a whole bunch of positions in recent days. I'm just stunned that we somehow seem to be avoiding recession even a full year following the housing peak.
BC |
