Market Mood: Different Paths
"The market is too expensive."
"The cyclicals are still cheap."
"I sold my tech stocks to buy Star Wars toys."
Sound diverse? Well, I would certainly hope so, given the first sentence is Buffett's
current line, the second is courtesy of you favorite Street guru, and the final one is, well...
I'll leave that one to you.
Anyway, the point of the above is to hopefully demonstrate that with the divergence in the
marketplace as of late, the prevailing point of view is quite muddled.
That is, with the Dow crossing the11,000 mark for the first time ever, and the techs, by
and large, sucking wind, the shift in the line of thought away from well known high flyers
towards the case that the old line companies might actually deserve higher multiples, is
quite frankly, scary.
Here's why.
With the economy kicking in for roughly the past five years, and your favorite old line
company now just beginning to do well, apparently, in the midst of the Street's
self-congratulation celebration, it has not been pointed out that even with the best
economy, such as the one we are in now, sales at these companies are not growing at
50%+ per year.
Not even close.
And even with all of the efficiencies that were gained over the past decade (i.e. the
realization that computers are your friend and firing as many as possible), the fact of the
matter is MMM will never be a YHOO.
Okay, but what about the fact that they are making money?
Certainly valid, and, if you choose to follow the dividend, these are for you.
Just be prepared for a long wait between cycles.
But since we are talking about value, let me shift into one of my favorite topics:
Mr. B.
Otherwise known as Warren Buffett.
Here are my quick thoughts there.
Looks like the markets have wised up to our favorite oracle.
That is, when Warren starts babbling about the markets, hoping they will go down, this
will only benefit...
Him.
As opposed to the rest of the pack.
Looks like the other investors out there decided to show him what they thought of that.
How fabulously funny.
As always, happy trading!
fabmktbabe.com
Street Slam: Foolish Ways -- Part II
Yes, Part II is finally here.
But first, as always, I would like to thank all of you for the e-mails with regards to Part I of
our series on The Fools.
Quite overwhelming, to say the least.
And, given the bulk of the responses I received from all of you out there, it certainly
appears that I touched on only the tip of the iceberg here.
But enough with the reiteration -- let's get this one started.
As a quick review of last week, you might remember that this column criticized not The
Fool's discipline, but their complete lack of understanding and recognition of the key
drivers within technology, essentially leading to a "jumping on the bandwagon" situation.
That is, if you are looking for an endorsement of the obvious within technology, not to
mention a portfolio filled with picks that react to, as opposed to anticipate, the key
drivers (and the corresponding players involved) in the space, The Fool is for you.
If not, you know where to go.
But let's move on and touch upon a couple issues that are seldom (if ever) talked about.
The first being the following:
The success of The Fool's site, not to mention The Fool's net worth, is due to their ability
to hawk their positions.
Otherwise known as writing about a stock, and then using the leverage from the
audience to ride it into the sunset.
As a quick note, in case there was any doubt, riding it into the sunset consists of not only
selling books that regularly extol the virtues of the obvious, but also benefiting from the
personal portfolios.
And, just to point out, if you think that The Fools are personally betting a few hundred
shares as a result of a new recommendation or "write up", you are sorely mistaken.
It's a bit more than that.
Something that certainly deserves to be pointed out.
As well as the following fact:
While buying a stock and then touting it (without disclosure) is illegal, buying into it "within
a week", after an initial write-up, isn't much better.
And it all boils down to the following issue:
Unlike those involved in the "offline" world of writing financial news, the bulk of those in
the "online" world, in addition to your favored PM's who frequently appear on your
favorite shows, have significant stakes in the positions they regularly talk up.
Which may be the "accepted" way of doing things, but quite frankly what it amounts to is
your "source" leveraging his/her audience (that's right, you) to make more money than
you will ever see.
So while you might feel fabulous about your couple hundred shares up 10, that's a drop
in the bucket compared to your source.
And, while The Fools are certainly better than one of our favorites, Jimmy C, who hardly
ever talks about a position favorably until after he is involved, the vested interest is still
the same.
Which brings up the following question:
How am I different?
I don't talk about stocks I own.
Period.
So as I wrap all of this up, my point is this: realize The Fool for what it is: not a foreseer
and an authority on technology, or even a source that can be relied upon for unbiased
"advice", but a source for entertainment.
After all, instances such as telling a clueless Maria Bartiromo on April Fool's Day that the
shift of The Fools was going to go towards momentum and out of a longer term strategy,
does have its way of retaining an audience.
As always, happy trading!
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