<<Monday will be a desaster. The rules of the games are clear now by today's action. Sell all stocks besides gold.>>
PMG.. Anything I have made post 1988 is the time when I have stayed my course even in the most difficult of cicumstances. I don't know anyother way, I invest with a reason and I will fooling myself if I relinquish my style based on market sentiment.
Everyone has a way of analysis, I have one too, for me the changes in the corporate earnings or growth will come as a result of failure of present technology and failure of globalisation process. Few percent point here and few percent point their interest rate changes only help to regulate the economy that was going on a speed that was in opinions of pundits unssutainable.
The Fed has a view with unemployment as low as around 4 percent they canot take chances to ease, they need to see inflation monster tackled through higher unemployment so that wage pressures could be countered. Now inflation stems from 70% wages and 30% commodities. We have so far been selling from 4000 level on Comp as a result of 'oil prices' bringing back the genie of inflation out of of the box. Now that is a selling purely based on infaltion from commodities, now we are selling from 3280 level down because we expect to see a sharp slow down in the economic activity and we are being told that we are into hard landing.. We have had a inflationnary based selling, a recessionary based selling, a huge sell of in techs based on huge slow down, all this within 2 month span..can this contradiction continue is what I try to reason..
1- If the first part of the argument is right, and oil prices were or are a worry that is no problem now with economic growth down to 2.5% from as high as 4-6% we shall see the oil commodity demand disappearing very soon. So commodity inflation is on the mend due to slow down of growth. Even if we see hikes in present markets the market trades for future and not present hence the worry of oil should be considerably lower. However that is not the case the market has factored in a lot of hike in presnt sell off.
2- The market now believes exactly in a sommersault or opposite of the earlier position that no it is not the worry of 'Oil' or inflation resulting from commodities it is recession. It is now about manufacturing slow down and impending recession. now inflationary threats and recessionary threats result from tow oppostie phenomenons. Again I see a contradiction, the slow down has churned out a economy that is still growing at a great speed of 2.5%, in pre- recessions periods we don't see CRB moving up, it lowers and heads down that is one realtioship that is established, now if CRB is doing fine and unemployment is as low as 4% plus where do we have a place for recession. The yield curve tells me so, the spreads indicate recession, however underlying facts do not suport the argument. In post recession periods we need to see commodities falling, we need to see unemployment upwards of 5.5%.
Now the Fed unlike short-termers of the market and self styled gurus does not like to dance on the shots called by the markets, rather this huge growth has a credit that is due to Fed. The market can do what it wants the fact remains that so far we have just seen the exact kind of slow down that Fed wanted, although luckily they did achieve the 'control of runaway asset inflation'. Now we have a market that has sold off big, we have economy that is doing just fine we have globa demand
that is good. As a result of commodity prices the financial meltdown we expected from commodity rich countries like Russia and even Middle east is now history, in all this we are seeing sign of demand emerging from lot of global nations and US corporates are at the forefront of the supply chain.
The above is the basis I have invested in markets, unfortunately I did not know that uncertanities like US presidential elections, the impact of sell off of .coms all came at a time which shaved a huge capital out of market, that is in my opinion a healthy sign we are in warning periods and people expect INTC to warn, however the write offs of investments in subsidiaries is one big fear, if that is tackled we shall see that valuations at present level if we add the dimension of growth are quite alright. I read this today and it is good << Brian Finnerty, head of trading at C.E. Unterburg Towbin, warns that Wall Street should still be prepared for more fourth-quarter earnings warnings. ``I'm sure you're going to see more preannouncement,'' he says. ``But the more that it's talked about and anticipated, the less the impact will be because the market has already adjusted.'' He points to the Nasdaq Composite's 47.6% decline from its March 10 high and the fiber-optic sector's drop in recent weeks. >>
I have made this 'mistake' to stick with the big picture, it has helped me all the time and I expect that ' I will be helped this time ' around too. My short term span is inter day use of options to bring my average down, it is with great honor I think that what I believe in I play with. It would be a sad day when I say that I was smart enough to be all cash. I just don't see the possibility of all cash that does not happen in any normal circumstances. If these smart guys are so good why do they charge pity-some amounts for their advice. Those who make money in the markets should feel insulted to be offered 12$ or 50$ or 300$ a month for what was a orginally a excercise to share exerience and knowledge. Everyone has a pension plan and everyone suffers when the market go down. The best part is that we share the good times and little bad times by analysing basics.
I am not a genius, I have written many a times self depracating remarks about my failings and inabilities, but I am honest person I have only one asset, what I say I do, my word is my contract in good times or in bad times I have never sold my knowledge, in shorter span of sellings we get villified but for me the way I handle my account is the way I wrote. On that count I . I am long until the fundamental outlook changes. Yes, my core is down but MSFT was 11 when I went into it and ALA was 21.. I have seen virtues of long term I am a long term investor. I don't define my wealth from 1st Jan 1999- 31st dec 2000 on that count it is in a territory I would have hated it to be on Jan first but in term os of this bull cycle I have done great and I see great future too. In interim I will try my level best to bring my average cost lower lower and lower.. If you want to run your account on daily reporting basis buy few anti depressents or better few blood pressure lowering drugs, we need to have a horizon, we need to have a rationale and we need to some integrity of analysis, it can be said that 'I read it all wrong' but I have a open mind I see things nicely however if I could not read it right with an open mind I would rather accept the loss honorably. I have been right many a times in 96, 97, 98, 99 'the declines come and and go'. Similarly in few months we will look back and see what we were writing, I have been reading on the weekend my 96, 97, 98 Oct posts and I was happy that events unfolded the way I analysed were not too far.
I expect this also to resolve in a similar manner. I have my hats off to the peole who have 'shorts' and congratulate them for a 'good read' of the market.. but in same streak will not 'condemn myself' for the read that has a basis. For my open mind, for myself and for a healthy routine I need a true picture and concession of loss and a strategy to mend. That is how I interpret my investment strategy, no great shakes, nothing great, banal but simple ways to deal with complex problems.
Our time will come too, the contradictions are unsustainable.. |
