The Big Picture for the Week of April 10, 2005

Barron's had an article that talked about how growth has badly lagged value in all cap sizes. The article quoted many people that think growth may finally assert some leadership. As best as I could tell the logic was that growth has to do better because its done so poorly. Okey doke.

I have been underweight growth for a while but I did add some last fall that has not worked out very well, I'm glad I didn't add more.

I wrote about this at the time, but my logic was (and I still believe in the reasoning) with a flatter yield curve more mature value companies have a harder time issuing debt and they rarely offer stock because it is too dilutive to earnings. Companies that do not dilute themselves too badly by issuing stock (growth names) tend to do better with flatter curves. Check the history and you'll see this has worked in the past.

The thing that kept me from overweighting growth was just kind of a common sense sniff test about demand for equities. Yes there was a nice fourth quarter rally but long time readers and the three of you that saw me on Cavuto know that I thought it would only last into year end, 2004.

I still see no visibility for great things anytime soon but as I have written before markets like this tend to turn very quickly for no reason at all. I would be surprised if I totally nail the turn. Fortunately, or at least I hope, that the way I am currently positioned will let my clients get most of a huge rally should it come.

There may actually be more risk to the upside, meaning that everyone seems to be afraid of the market and defensive to some degree. Although I do not put much into this line of thought it could happen which is why I keep writing to not completely abandon sectors that aren't working.