Time to Fasten Your Seatbelts
Published on July 3, 2009
Published on July 3, 2009
“Bearish” has been my usual theme since late Mar but I am now even more concerned with the internal health of the markets.
It’s quite interesting to see the “Bull” and “Bear” in the real-life. As I mentioned earlier, stock market participants usually have very short memory (unless a big fortune has been lost). Recently I had conversations with some of the “Bulls” who think that there is no way markets are going to fall further (may be a short term correction of 5-10% at most). I was given all sorts of examples like cheap P/E; no recession in BRIC and many more; and often these “rationale” only scratches the surface of “value investing”. If the company executives themselves can’t forecast the future, it is very inspiring to see bulls forecasting the cashflow and running discount cash flow models to announce stocks are cheap. Stocks aren’t cheap unless you consider the profit margins/leveraging of 2007 levels (still not cheap, probably slightly undervalued to fairly valued). Another interesting observation was “denial to take profits“. Even though some of their holding have gone up by triple digit percentage points in less than 3months, their view is that the bull has just started raging. Seems like Nov 2007 all over again, when Bulls were mad with my post.
Interesting. As many traders (or aka investors) as many styles and strategies.
I mentioned earlier that I have booked my profits on emerging market stocks. These stocks have provided solid gains over the past 3months vs. 3 years that I was originally expecting. My mantra for the next few months “Cash is the king who wears shining gold armor”! It’s ok I am wrong but if I am correct, I can pick up the same thing much cheaper than what it was a few weeks back or even today.
Dow Potential Bear Signal
Coming back to markets, Friday was an interesting day.
The AMJ’09 has been closed probably on a solid positive note by a lot of funds. Earning season is about to start. We’ll soon see if we are really seeing “green shoots” slowing growing into plants or were those nothing but yellow weeds.
Take your chances !
Have a great long weekend,
Profitable Trading, OP