Catching up - Part 2 Great Buying Opportunity or Continued Problems
On reflection, my insights were very dead-on.
Volatility - I predicted 2 months ago that things were about to get volatile.
Bottoming out at 12,700 - I predicted 2+ weeks ago that we would hit 12,700 before rebounding. I faced either selling out and sitting on the sidelines or riding it out. Given my inability to be active the past few weeks, I chose to ride it out. Wrong choice.
In any event, this was and has been a financial crisis. The World economy is humming along and to some degree so is the US economy. Further, the stock market is not overvalued.
To repeat my comments from past posts, Wall Street faced a sudden rash of margin calls. They had to sell out of positions to build up the cash to pay off housing market losses. And they can't buy. More sellers than buyers, and motivated - aka panicked - sellers are the triggers for the huge drop in the market of 10% in just weeks.
This is also what will happen to housing prices - sudden rush of sellers and few buyers will lead to distress in the market. Although it will last a lot longer than a few weeks.
LiveRocket is a long portfolio, but I've discussed short positions as well. I am not convinced that banks and homebuilders are bottomed. I think both sectors are playing for time and trying to ride out the housing bust, but they can only go so long.
Consumer durables (WHR, ETH, LAZ) are destined for trouble.
Investment houses like GS and LEH will be very hurt by the slowdown in M&A activity.
Autos and boats will suffer (HOG)
Cruise lines will be hurting as well (CCL)
For longs, I think this is a decent time to buy calls. Buy multinationals because
* the dollar will slide further, probably another 5% before year end.
* non-US economies are doing well
And if you do buy, go out 6 months. That gives 2 quarters of earnings
BUT beware: I did not see a lot of companies crushing earnings. Considering th eboost these companies had from a weaker dollar, I don't find this very encouraging overall. Only buy companies that are beating earnings expectations by at least 5%. Unless there are mitigating circumstances like one-time events.
Top growth sectors:
oil services and equipment (as always)
healthcare
Volatility - I predicted 2 months ago that things were about to get volatile.
Bottoming out at 12,700 - I predicted 2+ weeks ago that we would hit 12,700 before rebounding. I faced either selling out and sitting on the sidelines or riding it out. Given my inability to be active the past few weeks, I chose to ride it out. Wrong choice.
In any event, this was and has been a financial crisis. The World economy is humming along and to some degree so is the US economy. Further, the stock market is not overvalued.
To repeat my comments from past posts, Wall Street faced a sudden rash of margin calls. They had to sell out of positions to build up the cash to pay off housing market losses. And they can't buy. More sellers than buyers, and motivated - aka panicked - sellers are the triggers for the huge drop in the market of 10% in just weeks.
This is also what will happen to housing prices - sudden rush of sellers and few buyers will lead to distress in the market. Although it will last a lot longer than a few weeks.
LiveRocket is a long portfolio, but I've discussed short positions as well. I am not convinced that banks and homebuilders are bottomed. I think both sectors are playing for time and trying to ride out the housing bust, but they can only go so long.
Consumer durables (WHR, ETH, LAZ) are destined for trouble.
Investment houses like GS and LEH will be very hurt by the slowdown in M&A activity.
Autos and boats will suffer (HOG)
Cruise lines will be hurting as well (CCL)
For longs, I think this is a decent time to buy calls. Buy multinationals because
* the dollar will slide further, probably another 5% before year end.
* non-US economies are doing well
And if you do buy, go out 6 months. That gives 2 quarters of earnings
BUT beware: I did not see a lot of companies crushing earnings. Considering th eboost these companies had from a weaker dollar, I don't find this very encouraging overall. Only buy companies that are beating earnings expectations by at least 5%. Unless there are mitigating circumstances like one-time events.
Top growth sectors:
oil services and equipment (as always)
healthcare
posted by Andrew at
8:50 PM
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home