Most investors know that the S&P 500 hit a record high in October 2007 and a (the?) low in March of this year. But when you break it down by sector, things are a bit more complicated.

bearbulltimeline

Otherwise, for those who are wondering whether there is more upside ahead, the fact that four groups — telecom services, financials, energy, and utilities — have not seen new highs this month while the S&P 500 has might be a cause for concern.

Category: Investing, Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

12 Responses to “From Bear to Bull By Sector”

  1. Simon says:

    Check out the nikkei index …

  2. bsneath says:

    Dick Bove was spinning the theory today that Goldman and Morgan Stanley are going to take over small business loans (via indirect pools) after the community banks go out of business. I’m not buying it. I honesty do not understand what the source of banking profits will be in a few years given contracting credit and my perspective that our economy will not recover for many many years.

    Views to the contrary?

  3. investorinpa says:

    Bsneath, you bring up an interesting point…to me, the best stock investment for the next 10 years will be whichever bank/financial institution/lending company figures out a way to lend money to small businesses profitably and with little risk.

    Simply put, this will be the BEST INVESTMENT of the next decade, short of a company finding a cure/treatment for cancer or heart disease. Why do I say that? The need is there in the form of ample demand, very limited supply, this/these lending companies can be extremely picky with who they have as customers, and they can get every kind of collateral they want. If they are or become publicly traded, these strong small business loans/lines will be the kind of paper Wall St and foreigners will need to buy. Something that is extremely tight with lending criteria, great assets as collateral, strong base of debtors, and above average returns on loans.

    Anyone wanna weigh in or am I just nuts?

  4. investorinpa says:

    Incidentally, here is a copy of the largest check ever written…9 billion dollars which was sent to Morgan Stanley on Columbus Day to keep them afloat. Could not be wired due to the holidays, so an actual physical check was written… http://contraryriches.blogspot.com/2009/11/biggest-check-ever-written.html

  5. Pat G. says:

    Sounds like the average American consumer isn’t doing too well (telecom services, energy and utilities).
    Less discretionary income is a bitch especially if you are overleveraged. We know the biggest problem with the banks (insolvency). These are the same two problems that existed at the beginning and despite trillions of dollars spent, elude us. Nothing has changed. And we continue to dig a deeper hole… I got a letter today saying that there was Pell grant money available to me. No thanks.

  6. danm says:

    investorinpa:

    I think you’re onto something but my thinking is that BAC or some other government controlled bank will be able to do the lending so the upside will be negated by the multi year write-offs on the rest of their book of business.

    I’m having trouble finding businesses with upside that are investable. When these firms are not private it seems that the only ones who can access them are large institutional investors.

    Maybe the trick is to wait for the dust to settle and then start your own firm.

  7. danm says:

    bsneath:

    As the fed takes over MBS and other bad loans and switch them with other freshly printed dollars, it gives the banks new money to lend.

    The Fed has taken off at least 1 trillion in bad loans off the baks’ books. The banks now have at least 1 trillion new dollars. With a leverage of 20X that means they could lend 20T more! Unless the Fed takes away the punch bowl just in time of course (lol).

    Right now they can make more money borrowing at 0% and investing in treasuries at 3.5%. Why bother working when they can golf and get bonuses?

    But at one point, they’ll have to lend again and it won’t be to the consumer for at least 5-10 years.

  8. keithpiccirillo says:

    Bill Luby has pointed out the same premise, except he lists banks, home builders, retailers and semiconductors as short term laggards.
    Despite recent downturn,it might not be a good time to be adding new money to a sector pick until we hit 1060, and we can see where things stand.
    Wondering how health care scurrying may alter all these consecutive winning Mondays.

  9. bsneath says:

    But at one point, they’ll have to lend again and it won’t be to the consumer for at least 5-10 years.

    Danm, I guess that is my point. Who will it be? New home construction? Not for years, CRE? nope, Expanded industrial capacity? Nada, State and Local public works? Not hardly.

    I can envision a pick up in M&A perhaps with credit worthy corporations gobbling up cash starved start ups. But aside from that, I fail to see where the credit demand will come from.

    A lot of small businesses would like to borrow money to keep from closing down, but that is not a good investment for a bank.

  10. danm says:

    bsneath :

    Often it’s not in the sexy growth businesses where you make the most money. Too much competition.

    I think opportunities will pop up in every sector. I think the big box phenomenon just peaked and will shrink. Small and more local businesses will pop up here and there.

    I think manufacturing will be coming back gradually as the dollar shrinks and oil increases.

    I also think inflation will kick at one point and this will help with new loans.

  11. michaeld says:

    It is interesting to note that the healthcare and the utilities sectors have not grown much since the March bottom, but media indicates new money may be coming in.

    Also, the gold miners (GDX) has been performing great recently. Time will tell.

    admin
    ‘http://invetrics.com

  12. bsneath says:

    danm,

    Interesting. My take on the future is the opposite.

    1) With less discretionary income to go around, the Mom & Pops will be hurt the most (hope I am wrong in this one)

    2) Even with a falling dollar, mfg will continue to migrate to low cost countries – China, Vietnam, Indonesia

    3) While commodity inflation will be a global phenom, excess labor and capacity will keep USA inflation in check (although living standards will fall)

    Time will tell which direction is right.