Posts filed under “Investing”

Are Bears really more rigorous than Bulls?

Are Bears really more rigorous than Bulls? I don’t know the
basis of that statement, but I hear it alot, most recently from Jim Cramer. Aside from a few obviously conflicted late 1990′s
analysts, I find it hard to say that the typically Bullish, sell side research
analyst is not rigorous in their thought process, modeling, channel checks, and
theoretical processes.

My own bullish calls — and there have been many of them –
are just as rigorously derived as the bearish calls. Indeed, there are plenty
of meticulous quants, technicians and others who switch Bullish and Bearish
when conditions dictate. They would be insulted at the idea their Bullish calls
they are less rigorous than their Bearish calls.

Of course, the perma-Bulls – the broken clocks, the guys who
lost people trillions in 2000 and beyond, those clowns were never rigorous. But
then again, most of them were merely slick salesman – not analysts, strategists,
fund managers or economists – but touts and salesmen. Bennett Goodspeed (The Tao Jones Averages) had a
specific phrase for these weasels: "The Articulate

I think the reason for this misunderstanding of the rigor
required is simple: the markets and the economy are not stocks – the economy
doesn’t miss an earnings report by a penny, and see the market cut in half the
next day.
Sure, an individual stock can do that – but they obviously have a
very different life cycle. The bigger, macro systems — Business cycles, Market
Cycles, Economic cycles
— all play out over much longer time periods. And that
requires some patience to take advantage of.

Indeed, that patience is the reason I have been constructive
since last July (with a short negative move post-Katrina), positive for the front
quarter, but increasingly bearish as the year progresses. As long as the short-term technicals are okay, there is no reason to position short — not until
the internals begin to decay significantly.

I am willing to be patient, as any good investor should. If
the denouement hasn’t come fast enough for some people, well, sorry, that’s how
the cookie economy crumbles.

Further, some people see a day like today — Nasdaq slapped down a percent — and claim its easy
to "scare people out of the market." That’s nonsense. You can just as easily
scare people back into the market. Its what happens in any strong rally, where people get panicked in. Or how about a good old fashion short
(or both). Calling in borrowed
stocks? Goosing index futures?

Scaring the Bears is just as easy, if not more
so, given the theoretical infinite losses on the short side.

This is especially so when you consider all of the forces
that line up on the Bullish side: Mankind’s natural progress, population growth, and technological
development is the backdrop that has very strong Bullish tendencies. That’s not including the Wall Street machinery, the mutual fund industry, ansd whatever administration happens to be sitting in the White House.

To be
bearish when a cycle calls for it means you are willing to buck the natural longer term tide to take advantage of (relatively) shorter term movements. Its not easy, because after all, in
the long run, the markets go higher.

Of course, as the man said, the Long run is a misleading guide to current affairs. In the long run we are all
dead. . .

Category: Economy, Investing, Markets, Psychology, Technical Analysis

A Better Sentiment Measure: DrKW’s Fear & Greed Index

Small World: On Saturday, I mentioned problems with Citibank’s Panic/Euphoria sentiment measure. Then, I discussed the work of James Montier of Dresdner Kleinwort Wasserstein (DrKW) yesterday, (Seven Sins of Fund Management). This was the first time I ever mentioned him. By coincidence, I read about a Fear/Greed indicator last night from the very same James…Read More

Category: Investing, Markets, Psychology

Guide to Winning Portfolios

Category: Investing

Seven Sins of Fund Management

Category: Investing, Psychology

New Column: The Street Gets Inflation Threat Backwards

Category: Employment, Federal Reserve, Inflation, Investing, Markets, Psychology

Exploration versus Share Buybacks ?

Category: Commodities, Investing, Markets

Anticipating Consumer Slow Downs

Category: Consumer Spending, Investing, Wages & Income

Consumer Spending Slowdowns and Bear Markets

Category: Consumer Spending, Investing, Markets

Sourcing the Greenspan Chatter

This is the article that the Greenspan quote came from that popped the market today; I don’t know how accurate it is (holographic image?) but

Gold price riding high on fear of terrorism, says Greenspan
Leo Lewis, Tokyo
February 09, 2006


"ALAN Greenspan, who stepped
down last week as chairman of the US Federal Reserve after 18 1/2 years, has
blamed the threat of terrorism for the high gold price, in his first private
sector speech since being let off the leash of officialdom.

According to
members of his audience of international investors – watching a holographic
image in Tokyo as he spoke in New York – Greenspan said the high cost of gold
did not reflect inflation or the strength of commodities, but rather a fear
among investors of a major geopolitical conflict. There were people who believed
that a nuclear weapon could be detonated within five years, the former American
central bank supremo said.

The low probability of such an event occurring would not necessarily avert a
spike in the gold price, he added.

Greenspan went on to discuss a range of topics, including the problems
created by a lack of investment in refining capacity by the oil industry. He
said this failure by the oil majors meant that the era of cheap energy was
almost surely over.

The former Fed chairman is also said to have indulged in a moment of
self-criticism over the central bank’s failure to prevent the market bubble in
the late 1990s.

That may explain Gold’s $20 whackage yesterday, but what about all the rest of the metals and commodities?

Also, if you missed this, you MUST read it:

Former Fed Chief’s Inscrutable Statements Baffle Wife

Its a hoot!

and on the chance the article disappears, I’ll archive it after the jump . . .

Read More

Category: Federal Reserve, Inflation, Investing

The Risk to Equities from Rising Rates

Category: Federal Reserve, Fixed Income/Interest Rates, Investing