The Big Picture for the Week of May 31, 2009

8 Comments

  1. Anon 7:00,
    I’m slowly coming around to the idea (however absurd I think it may be based on reality) that the markets could continue going to 9,500-10,000 on the DOW and 1,000-1,050 on the S&P before the bottom drops out, especially after considering how long the absurdity lasted in ‘06/’07. Could end up being the easiest (or second easiest to Oct. ‘07 in hindsight) short of all time if it gets to that point. This market rally is mostly all liquidity/bailout money driven combined with setting expectations so absurdly low and spinning every piece of news they can into “better than expected” or things are “turning around”. It’s been a brilliant PR campaign by the administraiton and their cohorts in the MSM. I’ll give them that. It’s really working with the rank and file out there based on discussions I’ve had with people. The obliviousness and lack of any critical thinking astounds me, of course my thinking could be all incorrect and is why I no longer conduct my own trading.
    Paraphrasing the Minyanville article: … “Consensus economic views are far too bearish. … Most of the arguments … based on discredited ideological precepts that have become urban legends and have very little empirical evidence to support them. I haven’t written in detail on debunking these urban legends for a reason: The market isn’t ready for it”…I find it amusing that the author does not disclose the rationale behind debunking these so called myths?
    Rob from WI

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  2. Roger,

    I had an observation while watching your video that you may find interesting. Your description of why you got out and then back in to China was very “Roger like” – i.e., no emotion, made a plan based on objective evidence long before the event took place, and then followed the plan. However your description of why you got out of India was very “non-Roger like”. You said you “just had the sense that something wasn’t right about India”. Sorry, but “just having a sense” about something is no different than using emotions to make decisions. There’s nothing objective about it.

    – AAG

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  3. “un Roger like.”

    interesting comment and probably also the point of the video. In terms of themes I think it is difficult to rely solely on objective measures. Someone can be wrong about a theme for many reasons. And if you realize you are wrong (for whatever reason) then wouldn’t you have to at least consider selling?

    In that context does a particular price action have any relevance at all?

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  4. Weekly lesson in investing:

    a) Globalization killed the upper middle class wages
    b) illlegal immigrants killed the lower middle class wages
    c) only jobs in town are chasing monies printed by the fed
    d) gold & silver & oil are the best investments, rest is speculation

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  5. A7- These are the sort of “fundamental” arguments you hear once a big rally is underway. The fact that the VIX is low tells me people are becoming complacent: all the folks who bought really expensive put options last year saw them expire worthless and now they don’t feel the need for downside protection (that’s why Vix is down). The economist David Rosenberg also dissects the issue of “huge cash on the sidelines.” The cash hoarding on the sidelines is there to pay down the largest debt balance we’ve ever seen (i.e. households are raising cash to pay off debts when they become due.)

    That said, he’s got decent arguments, but this is why I try to stay away from any fundamental analysis and stick with technicals and seasonal cycles. Everything you need to know about supply and demand for equities can be observed in the chart. IMO, SP 960’s will be a tough nut to crack. If the SP500 takes out 930, then we will see a rush to the 950s/960s where I think we see a hard reversal.

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  6. Completely off point.

    Here was my take on things Thursday-Saturday. After flying down from NE Ohio and having a successful business meeting near Wilmington, NC, I decided to forego all thoughts of the markets. socialism, inflation, nukes, wife, kids – even my dog, and drive down to Myrtle Beach. I entered my first ever Kareoke event(after a few beers) at age 57 and won it singing “Oh Babe, What Did You Say? by the immortal Hurricane Smith.

    Priceless. I recommend it to every stressed investor.

    T

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  7. Hello Roger,
    tx for answering how to exit the long term theme. Very useful. You are very kind. As far as the country themes, I send you two links about cyclicality on sovereign defaults. However when you talk about Chinese middle class, there are lots of USA and European companies that can be used for that. Like Yum, Bulgari, that can be used without the governmental and political risk. For instance in global trade there is a Chinese(Hong Kong company that is fantastic, I cannot think an equivalent in the US and Europe. So perhaps the country can be used within a theme, that is a theme within a theme but that increases the risk. I remember after the ’70 and ’80 oil shortage and embargo Venezuela went from great to a basket case, and south American countries where defaulting on Citibank, chase, .. loans. Citibank in 1987(I think) went to having no capital and almost closed. So emerging countries can go from nothing to booms and then to bust very rapidly (in 5 to 10 years). Longer term themes I think can find in the middle class theme (like you pointed out) and a great company (us, European) can take advantage of the country theme. There is a great book (the Living Company) where it talks about royal dutch shell. In the book it points out how they went to Brazil and then brazil nationalized the brazilian operations. Here is a theme of a company that changed with the times and survived since the middle ages. However, Roger, want to thank you about Theme investing since I did not give that much thought. I have played out very short term investing most a week with large size. However perhaps now I better start changing my style.
    Best,
    Jeff from Milan

    Reply

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The Big Picture for the Week of May 31, 2009

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