This morning I participated in my first (hopefully my last) shots fired medical call. The shots were fired at a pit bull that bit a sheriff's officer in the leg. Zowie.
Statoil (STO), which is a longtime client and personal holding, is buying Norsk Hydro (NHY), save for the aluminum business. The deal is intended to strengthen Norway's position on the world oil scene. The deal makes the company the world's largest offshore operator. I am inclined to hold onto the stock but the addition of NHY stands to make STO more volatile. Since it does not close until 3rd quarter (making regulatory assumptions) this notion of increased volatility may change.
John Hussman's post this week is an especially good read. He gives a mea culpa of sorts and some historical context about what the market will have to overcome, on a valuation basis, to move higher. To be clear, the market is not cheap but history shows us that expensive can get much more expensive.
A last point; there are so many people expecting a multiple expansion for US stocks in 2007 that I have to wonder whether or not it can actually happen. My market prediction for 2006 was way off and so I am not arguing from a point of authority but should we fade the multiple expansion trade? The argument for expansion does not seem rock solid to me and we are close to 950 days without a correction or bear market. I am not trying to make a prediction so much as not losing sight of how markets usually work.
Wikinvest Wire
3 comments:
Hussman made some good points. So does the UBS analysis posted by Bill Cara at http://tinyurl.com/y2ffzh WRT potential surprises in 2007 (mostly positive). As I've commented elsewhere, value-oriented strategic trading/investing is going to lag in a momentum market, that's just the way it is, and global markets could indeed levitate even higher from here. I've been wrong on the overall direction of the equity markets since last May but, in the end, one must assume true value will out and patience will be rewarded.
In the meantime there is no inherent problem in developing a second, growth oriented tactical portfolio if you wish. As I learned years ago it can not only boost returns in times like this (assuming a decent model) it helps maintain discipline WRT your strategic core; like pulling up a horse in mid-leap, nervous alterations in previously determined core allocations usually ends in a tumble.
I remain as before, net long but hedged w/ more cash than usual (having some fun w/ metal miners and the bond market though and there are some really good companies that have been sinking closer to accumulation rather than rising so some of that cash may be put to use sooner than later too).
fwiw, Ken Fisher is expecting a very bullish 2007.
http://blogs.forbes.com/digitalrules/2006/12/ken_fishers_bul.html
Fisher is a very smart fellow and has made some solid calls even if his greatest skill still lies in gathering AUM. Don Hays is also a very smart fellow, as solid a tactician as Fisher is a strategist, and he's calling for a ripping good 2007 too.
They're both certainly smarter than I am and, come to think of it, there's hardly a living bear left in the entire room anyway so what me worry ...
Time to raise my hedges! ;->
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