Hi Scott,
Maalox Market Moments
I managed to spend a hefty chunk of cash reserve on my Ultra and Vista accounts this week. Then when I get home Friday night and flick on the TV, the national news is quoting somebody about how aweful the market is and how it's just the beginning of a severe rout.
I was then comforted by watching Jim Stack on the NBR interview with Paul Kangas. Jim has been a bear as long as the Idiot Wave, but to a much greater degree. I think I heard him say that he's now 80% cash!!! I don't know how long he's held that cash, but that makes the IW's reading look outlandishly RISKY! Only my mutual funds are close to my IW suggested cash reserves at this point. A few of my stocks have cash left, but even with the IW's drop in recent weeks, overall cash reserves are still way short of the mark.
I can't imagine that the data from this week's activity is going to do anything but push the Idiot Wave down further. I've heard of some renewed talk of a small down tick in Fed interest rates, but we'll have to wait that one out. (they probably want to reduce short term rates so that the yield curve won't "invert")
It makes me sad to think of all the short term traders out there that bought for a quick buck or two about the middle of July. They are now Long Term Investors whether they want to be or not (if they want to be profitable)! I think I had 4 or 5 up arrows on my stock screen yesterday out of about two pages of stocks. Wall Street has become a Kennel full of "dogs" suddenly. Even Dell, Cisco MicroSoft and other big names were given a case of late summer fleas.
In my own account, two stocks that went up were Mexican in origin. My Mexico Fund (MXF) ticked up for the first time in what seems like an endless string of bad days and ICA (same symb.) also went up. Well, it couldn't go much lower!! ICA has fallen from around $20 last fall to $5 as of Thursday. Using the basic rule of thumb that you need the same %age of cash that you expect for the down draught in a stock, I guess I should have allowed ICA to have had 75% cash at its peak!! Alas, I only had 50%. Boy, do I ever own lots of shares, however!
Of note is that Hong Kong tracked upwards ever so slightly at the end of the week as well. I don't know if this is a fluke or a trend yet. However, since it was up slightly, it stands out boldly.
It looks like Wall Street AND president clinton are preparing their appology speeches!!! I could almost sense the feel of underlying panic in the CNBC announcers yesterday when I tuned in around noon. They were trying to keep very unemotional about their reports, but their long faces told the story better than their words. I could swear that one gal's voice even quivered just a touch as she talked about trading curbs being enacted again. One should never let children play with Sharp Knives or adults play with Gut Wrenches unless they know what they are doing. I had the Gut Wrench out this last week a few times and was beginning to think that I had some loose screws that must need some attention!
Then, it would come to me that this is EXACTLY the kind of conditions that have proved so profitable for me in the past. I've seen so few real nasty BEARS in the last decade that Pavlov's conditioning hasn't taken full effect. I should have recognized that the sinking feeling I had in my stomach is the same one that I had in 1987 and 1990 and, through sticking to my BUSINESS PLAN, my "business" recovered and prospered manifold.
My small cap stocks are now looking better fundamentally than in a long time. The large cap part of the market is better than earlier this year, but still hardly a fundamental bargain. My suggestion, for those who like me are a bit short of cash, is to try now to think about what in their portfolios is most likely to recover FIRST and spend the remaining cash in those areas. At worst this is a crap shoot, at best, it will help one to focus on fundamental value. This is what I've been doing.
Best regards, Tom |
