The Funniest Channel on XM Radio: CNBC


 

Indeed, they are one funny bunch of folks. I did a lot of driving today so I spent that time listening to “Street Squawking” and “Bell Calling”. I love this network because it gives such an honest and upfront analysis on the predicament of the markets while at the same time those offering us this knowledge seem oblivious.

For instance in one session, a few hosts were sitting around discussing what was the means for seeking a considering bottom in the stock market. One guest began explaining how a) he was looking for a more pessimistic view from traders and b) that the media was driving the attitude of the market. I don’t even know if he understood the irony of his own statements.

Regarding market sentiment, we all know that the market never makes everyone happy. A “Bubble” is simply a term used to describe when the market rewards those who know nothing about investment whatsoever, and is followed by its respective “Bust” when the market rewards those who sat and the sidelines choosing not to trade in hysteria.

You’re either a long-term trader or a short-term speculator.

As far as the media is concerned, anything broadcast to millions of people free of charge is called media. What George Soros thinks, says or does in the privacy of his own office is personal and would not effect the judgment of the majority. However, the minute he proclaims his ideas, speculations or theories over public airwaves it is now media and any information relayed is immediately priced to market.

Anyway… here’s what I did learn

 

  • We are nowhere near an absolute bottom in the stock market. Yes, we may see a short-term rally but this will be concise, insignificant and for most traders unprofitable.
  • Individual sectors may see a rising in share value due to the fact that most sellers have sold and few buyers have stepped in from the sidelines. These include select homebuilders, small banks, health care and possibly tech stocks. It must be taken into evaluation however that while the market corrects it will drag down with it expectation of these sectors as well. Hence while a P/E ratio of 22 may have been adequate a year ago, today 15 should be a more apparent support of fair value.
  • The Commodities Bull strong as we have entered into the second phase of investment. This is when institutions, trading funds and large investors come into the market. While the media does have a much less pessimistic view on oil, commodities and precious metals, it does come with a high level of skepticism and caution.
  • One guest who was on today said “We know when the decline is over when stocks no longer suffer from bad news”. I think this is a great point. Stocks have further to fall because sentiment has simply gone from “good” to “semi-good” with many investors seeking ways and reasons to hold onto their portfolios. When they realize how far these stocks could fall (one analyst put Citi at $16) that’s when the real selling begins. We are at around that stage.
  • Stagflation worries are surprisingly under-rated. While the street has a clue of what may come they have not yet experienced a solid dose of it. Many producers are only now seeing the necessity to raise consumer prices on everything from wheat to milk. As one businessman I spoke to put it “We can no longer afford to keep our current prices”.
  • Unless we see a resurgence of the income wage hikes that we saw in the 70s, the consumer is in some serious trouble. This means that instead of being inflationary for all, it may end up stationary for few and ultimately deflationary for many. Remember that ‘flation refers to monetary availability or lack thereof.

All in all I say business is good for he who takes the time to understand the big picture. To step away from the hubris and good fortune we’ve seen in recent (all 25) years and accept a more conservative yet enterprising value based orientation of the markets, whichever they may be.

As for myself my portfolio’s up over 30% year-to-date so… 🙂

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