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Politics : Formerly About Applied Materials
AMAT 230.17-1.4%Nov 7 9:30 AM EST
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To: Jim Willie CB who wrote (22268)7/30/1998 1:58:00 AM
From: Jacob Snyder  Read Replies (7) of 70976
 
WARNING:

This is your captain speaking.
The final cockpit warning light is now flashing red.
We are entering a period of turbulence.
Your high-fliers will abruptly stall, with the nose pitching down.
All passengers are advised to move rapidly to the exits.
The first ones out the door will be given parachutes.
The rest of you will be given a kick on the butt and told, "you were warned".

Indicators:

1. market PE off the top end of the scale
2. P/S, P/B: same thing
3. dividend yield at historic lows
4. Dow Theory
5. advance:decline at 1:2 on days the market advances
6. market breadth narrowing to almost nothing. Nifty 50.
7. profit growth grinding to a halt.
8. overcapacity in numerous manufacturing sectors (not just semis).
9. The second largest economy in the world entering recession.
10. They just elected a leader with a reputation for doing nothing.
11. the Fed says (clearly and repeatedly) that the next move will be to tighten. They will do this pre-emptively, because they're much more worried about inflation than the slowing economy (or deflation).
12. The Fed chairman also says banks are lending money that won't be repaid, and investors are buying stocks that won't go up.
13. foreigners are buying U.S. equities. They usually are the last group to enter the market, at the top.
14. investors are buying without regard to the fundamentals.
15. Momentum investing is the dominant strategy.
16. The wisest investor of all (Buffet) is buying silver and bonds, and using his own overpriced stock to buy hard assets.

My strategy is to find shorts to hedge all my long-term long positions. Cash would be another good alternative. I will only take new long positions on quality stocks whose PE is below their past and expected future EPS growth rate. That means, given current conditions, I can't take any new long positions.
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