Mark, was that a question to me or to my uncle? -g-
For about 3 months I am theorizing that US economy will slow and bonds are safe havens. This is a case of bond and equity divergence. I think Buffet has had the same strategy. When he was buying bonds in early August, everyone ignored it. But a month later when WSJ reported that Buffet bought bonds, a lot of folks jumped in to bonds. I don't understand why, in this information age, it takes so long for the news to disseminate! -g- While the bons strengthened, a lot of brave folks took it as a strong case for equities and we have seen new highs on S&P. No matter what the vested interest (Inv bankers, analysts, mutual fund managers) say about earnings, I am not impressed by the earnings quality. Even if they were to be as good as they are potrayed to be, the market has already dicounted the "good" in the prices.
I don't know if you remember one of my posts early this month on this thread. I said don't buy calls/shares in earnings anticipation or if you do, it will be suicidal. The reason is simple, when the game is so well publicized and well followed, it won't work. Besides, when a vast majority has already bought, who else is left there to buy? This, with all due respect to people who have done this, is a classic case of dumb-money chasing stocks while the smart money is doing something else (buying bonds.) In the recent Asean turmoil, this phenomenon is exposed and now a lot of folks can see it.
With valuations so high, we don't need a catastrophe to tip the balance. Asean troubles have exposed the weakness in US markets, IMHO. They have not caused it. Also, for those who think every dip is a buying opportunity, I think the market is going to send a wake-up call very soon. Trust me, at some point dip buying won't work. I think we are close to that. Very close.
This is my unorthodox view of what's happening. As usual, I reserve the right to be wrong.
-Moan |
