The Government Isn’t Running GM?

It looks like the government is forcing Rick Waggoner out and playing a big role in the Fiat deal with Chrysler. So is the administration playing the role of Board Chairman with GM and investment banker with Chrysler? I certainly do not have the answers here, not by any stretch, but hasn’t Fritz Henderson been part of the senior leadership at GM during all of this and I seem to remember Fiat making very unreliable cars. I must be missing...

Bemidji State=Frozen Four

The NCAA hockey bracket blew up, only one #1 seed made it through, Bemidji was the last team in and made to the frozen four. Tyler Durden from Zero Hedge gave a rundown of market activity and recent economic data that might send some folks running for the hills. Included in the rundown is a reminder, with some datapoints to back him up, that the biggest up days and the fastest rallies usually occur during bear markets. We have had some good sized bear market rallies, although I have been expecting a bigger one, and the current one will either keep going or has petered out but it is very likely that the lift that turns out to be the real thing will be met with far less glee than met the start of the November rally and the current one. Michael Kahn and others have mentioned revulsion is an appropriate sentiment to mark a bottom and while there is some of that there is not a lot. I have no idea if my belief in a monster bear market rally will be correct or not but that is not the point. The point is that if the rally goes from big to monster that you avoid getting overly excited on the way up and if it then fails, turns around and goes right back to 700 on the SPX that you then avoid getting too upset. As this market cycle makes its way to the next bull it is true that more emotion will not make the ride any easier. On another note Legg Mason may come out...

Bemidji State=Frozen Four

The NCAA hockey bracket blew up, only one #1 seed made it through, Bemidji was the last team in and made to the frozen four. Tyler Durden from Zero Hedge gave a rundown of market activity and recent economic data that might send some folks running for the hills. Included in the rundown is a reminder, with some datapoints to back him up, that the biggest up days and the fastest rallies usually occur during bear markets. We have had some good sized bear market rallies, although I have been expecting a bigger one, and the current one will either keep going or has petered out but it is very likely that the lift that turns out to be the real thing will be met with far less glee than met the start of the November rally and the current one. Michael Kahn and others have mentioned revulsion is an appropriate sentiment to mark a bottom and while there is some of that there is not a lot. I have no idea if my belief in a monster bear market rally will be correct or not but that is not the point. The point is that if the rally goes from big to monster that you avoid getting overly excited on the way up and if it then fails, turns around and goes right back to 700 on the SPX that you then avoid getting too upset. As this market cycle makes its way to the next bull it is true that more emotion will not make the ride any easier. On another note Legg Mason may come out...

Sunday Morning Coffee

Some good stuff in Barron’s this week. First is this assessment of hedge fund manager James Melcher; “Although he’s a believer in the importance of asset allocation, Melcher thinks that security selection has become close to irrelevant — that there’s a greater need for broad market judgment rather than rigid portfolio modeling.” Now keep in mind his returns have been stellar; he was ahead of the S&P 500 by about 80% in 2008 due primarily to knowing what parts of the market to avoid and what parts to short. This is of course the essence of top down management. You may not be much for shorting, I am not, but recognizing when an asset class should be avoided or underweighted, like when demand is unhealthy (US equities) or prices are at all time highs (US treasuries) can make all the difference. Think about the last two bear markets. Simple recognition that demand for equities was unhealthy (for me this means a breach of the 200 DMA but there are other measures that work) became the most important indicator leading to the most important action that someone could take; reduce exposure. Knowing how much exposure to take off gets trickier but even a little reduction would have helped many people. This takes me to the comment I cited in this week’s video where the reader seemed to conclude that with Yardeni (and he is not alone) saying the bottom is in and Roubini (he is not alone either) saying there is more downside to come the best course is buy and hold. For some people buy and hold was, is...

Sunday Morning Coffee

Some good stuff in Barron’s this week. First is this assessment of hedge fund manager James Melcher; “Although he’s a believer in the importance of asset allocation, Melcher thinks that security selection has become close to irrelevant — that there’s a greater need for broad market judgment rather than rigid portfolio modeling.” Now keep in mind his returns have been stellar; he was ahead of the S&P 500 by about 80% in 2008 due primarily to knowing what parts of the market to avoid and what parts to short. This is of course the essence of top down management. You may not be much for shorting, I am not, but recognizing when an asset class should be avoided or underweighted, like when demand is unhealthy (US equities) or prices are at all time highs (US treasuries) can make all the difference. Think about the last two bear markets. Simple recognition that demand for equities was unhealthy (for me this means a breach of the 200 DMA but there are other measures that work) became the most important indicator leading to the most important action that someone could take; reduce exposure. Knowing how much exposure to take off gets trickier but even a little reduction would have helped many people. This takes me to the comment I cited in this week’s video where the reader seemed to conclude that with Yardeni (and he is not alone) saying the bottom is in and Roubini (he is not alone either) saying there is more downside to come the best course is buy and hold. For some people buy and hold was, is...