Earlie from Earlie:
Will be on the road for a bit. Here's a few comments to stimulate discussion.
Too bad Niles partially spoiled a good party, although nothing wrong with taking those nice short term profits on Dell on Friday. If the dippers dive in before numbers, it makes sense to reactivate the puts or shorts. If not, perhaps a very light touch. I love this company longer term (as a short of course), but why take big chances or big bets at this stage?
The demise of the dippers must occur before the road to a bear market is clear. They are the market's cushion now, as the bears are largely extinct. The surviving bears are now very tough, very seasoned, but few in numbers.
We will have a short but useful interlude after Tuesday before the Q1 warnings period commences in earnest. This one will start early and will be very nasty. The market could move up during that period, but the heavy meal of rotting fish eggs coming with this "pre-announcement" period may provide some indigestion. I like the odds better as it nears.
This last few months have been very hard on bears, as stocks have advanced without any fundamental support, which tends to twist the mind. On the other hand, the largest short squeeze in history is just about over now, the dollar hasn't a hope of escaping a serious slap to the head, A.G. has very little ammo left, L.America is caving in as we speak, and Japan must and is starting a heavy dose of chemotherapy that may cure the bad loan cancer (I hope), but is sure as heck going to leave the patient weak, sick as a dog, and powerless during a lengthy convalescent period. Look for plenty of bad news from Asia.
Massive excess loose credit caused this bubble. It also remains the bubble's sole means of life support. I thought the N. American consumer was "tapped out' almost 2 years ago, but he has resolutely climbed the credit mountain to even rarer altitudes. Hypoxia leaves its victims delusional. The dippers and internut momentum buyers provide perfect examples of the affliction. It is only a matter of time before they die in a storm or wander over a cliff edge.
Once their demise, or some other shock kicks the market into reverse, the whole crazy house of cards will fall, simply because the debt-laden consumer, feeling "wealthy" because his stocks are up will recognize his falling net worth and cease buying anything of consequence. Unemployment and plant closings are already starting to erode things in the manufacturing sectors, trade barriers are starting to appear (it was a foregone conclusion that Rubin's "we'll buy everything you can ship" approach to assisting the offshore countries to regain their footing had to work in a hurry or else) and now we are watching the deflationary wave sweep northward from Latin America.
Those nut bars that see North America as isolated from the Tsunami are brain-dead.
Timing the tulip is for smarter brains than mine. A week? A month? Perhaps even a few months? Who knows. All I know is that the fall from these altitudes is going to be a long one. Long this market is gambling, not investing and the stakes have now risen dramatically. It makes more sense to me to watch from the sidelines until the gamblers are sleeping or dead, before quietly lifting the wallets of those who haven't already been rolled. The important thing is to be liquid on the backside of the coming crunch. Those that are will have very little company and opportunities galore.
The odds that the tech sector will provide leadership to the cliff's edge is quite high. The funds hump massive positions of these stocks (distorted weightings in historical terms), and the valuations are pure and simple obscene. The neat thing for the observant is the fact that since the whole sector is so heavily dependent on PC sales, having a handle on this provides one with a reasonable understanding of how close the cliff edge is. That it is within a step or two is fully apparent. The deceleration in PC sales is now two years old. Sales growth has not only slowed it is now turning negative. Inventories are gigantic. Prices are in free fall. The pool of prospective purchasers shrinks daily. Supply shows no signs of abating. Only the blind continue to shuffle towards the abyss.
As usual, too wordy but as I'm frequently absent, it averages out. A serious market break is near enough now to smell. Mattresses against the doors. For those who think I'm a ranting forever-bear, my best wishes to you in your coming experiments in the field of gravity. I'm told the fall doesn't hurt, but the abrupt deceleration really smarts.
Best. Earlie |
