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Monday, July 5, 2010

Market Thought... epitome

I have a problem. Its more of a mental issue really. Whenever something does not jive with my understanding I tend to keep thinking about it, boarder line obsessive. Its an issue I dealt with all my life, and find it most useful for getting to the reason behind things, its especially helpful for trading.

On Friday, I read this article regarding well known Hedgie Barton Biggs selling most of his technology stocks. When I read it I was in serious disbelief. His firm manages $1.4 Billion dollars, and he was aggressively selling over the last week. Here is a man who was bullish two weeks ago, indicating he would buy on the dips, then did a complete 180, and sold most of the funds equities AFTER the bulk of the decline. It is the epitome of what I thought would happen w/the 10yr yield going below 3%.

Lest we not forget the market was trading at over 1200 just a month or two ago, and range bound since. Near 1120, during the recent rise was the time to unload, and I indicated the retest. Then mentioned the perceived negativity due to the 10yr yield declining. Since then, the Biggs' article indicates to me my correct assumption of how the big-boys would act.

So here we are, now staring into the abyss.

I do not know if the hedgies are looking at any specific new data set that the rest of us are not seeing, hence the late trigger. Or if in fact my reasoning behind the market action is correct, and they are selling out of pure unadulterated fear of deflation.

I look at the futures this evening, and it indicates we will continue to stare into the abyss until the 10yr is above three and rising moderately.

There is one fact I do know. Austerity measures do not equate to depression. Especially when it is mixed with stimulus and massive liquidity. It can very well equate to a slow down, not a credit freeze, but a general run-of-the-mill slowdown. But when I look at a company like IBM who projected year-over-year eps growth of 15% from 2010 to 2015, consistently outperform and are now trading at a 2011 PE of 9.9. I seriously question the blind selling.

(I am tired of trying to justify and argue the point, but those that question IBM's projections, or any other large cap tech, just look at how they previously projected, look at how they performed during the 'post-Lehman-credit freeze'. Just look it up for yourself. Although I am sure, if you are selling blindly you do not care.)

1 comment:

  1. Once again, a ballsy call. Very nicely done.