If we had played a drinking game with that phrase I would have been passed out an hour into the trading day on Thursday.
There are a couple of one-liners that make for appropriate responses like maybe the fundies haven't changed but the market's perceptions of them has changed or what we thought about the fundies before was wrong.
Depending on how this week's events shake out the market might be telling us something has changed. Further, the statement that nothing has changed overlooks the fact that the fundamentals rarely drive the bus in the short run.
What is your favorite stock in your portfolio? Is it down this week? Is it related to China or the carry trade?
I don't know that I have a favorite stock but plenty of names (probably all?) in the portfolio that have nothing to do with China or the carry trade are down on the week. Great fundamentals have meant nothing this week. Of course one week means nothing to your long term financial well being either.
More importantly; if something major were changing do you think that many people that they could round up to interview would see it ahead of time?
I dug up this chart yesterday but never got around to posting it. It shows strength and weakness of the NZ dollar and the Hungarian forint both against the yen.
Both are beneficiaries of the carry trade. Both exhibited huge moves up before each getting pasted in the last few days.
The chart shows that some folks who put the carry trade on in hopes of 7% (annually) a few days ago are now under water after the currency moved 4% against them in a week.
8 comments:
I agree that nothing changed fundamentally this week. What happened was that some fundamental problems were exposed. I think people have been ignoring the weakened housing market, the overheated market run-up, and the fact that so much money seems to be wound up in complex derivitive-based gambles that depend more upon psychology than earnings. Last week, I was up 10% so far for 2007. That's an annualized 60% gain--I knew that wasn't a very realistic number, so I've been sitting patiently with a small pile of cash wating for a pullback.
It's pretty hard to pick a favorite stock, but I am fond of Yellow Worldwide (YRCW) right now. It's down about 5% on the week, but still up 15% YTD. Another fave is Ball Corp (BLL), which is down 3% on the week and up 5% on the year. With only a couple exceptions (IRBT, for example), this is pretty much the story of my 13-stock portfolio. That's why I've taken some profits off the table and set up alerts to notify me when stocks on my watch list fall 8% below their Feb 20 price (which is the day the DJIA peaked). I'm counting on the market giving back 8-10% of its high, so re-buying at 92% peak valuation seems like a safe bet.
Instead of selling positions which are still in an uptrend, using laddered triggers, I have immunized my portfohio by purchasin purchased UltraShort ETFs. I am still working out the percentage of the portfolio to be in UltraShorts but probably around 10%.
RW:
theinformedtrader.com
sorry for inaccuracy
Re: those of us in all cash, it's quite true that there's risk in missing out, but I take comfort in the saying, "I never went broke taking profits."
TomK has my highest admiration. He has a model that has produced and he sticks to it.
Anyone following Mebane's ports? Is there a way to see a chart of the entire port?
Anon 8:06 that's a reasonable approach, some instruments work well with stops, others are better hedged but otherwise left alone. The amount and type of hedge depends on the kind of instruments -- real assets could be hedged w/ zeros rather than a shorted index -- 'how much' depends on the upside potential you want on the table or, conversely, how much reduction in volatility will help you sleep at night. I suspect there's more art than science to it but could be wrong.
Anon 10:28, thanks for the correction WRT theinformedtrader. Agreed, it's better to lose an opportunity than lose money, but 100% cash basically says you see absolutely no play in your preferred arena. I've been there myself so no big deal but it's been awhile even in my trading account; i.e., moving all to cash was more common back when the range of available investment instruments was rather small and relatively expensive to work with which is not the case now.
I just did a quick look at my timing model to see where it's likely to end up this weekend. There have been a lot of changes within the individual indicators but the model itself is only a half point lower: .5 signaling 60% long 40% cash. Here are the biggest developments:
- The Russell 3000 5 day MA has fallen below the 75 day MA. That indicator toggles from bullish to bearish.
- Goefert's Smart/Dumb Money Confidence Model goes from bearish to neutral based on my rules/interpretation.
- Goefert's Composite model has reversed from overbought territory, moving that indicator from mildly bearish to bearish.
- Goefert's Intermediate term model went from mildly bearish to mildly bullish. It's now in oversold territory.
I expect most of the sentiment indicators to cycle down to neutral or mildly bullish territory fairly quickly.
In the meantime I'm watching the unweighted Value Line Arithmetic Index. If it's 5 day moving average breaks below it's 75 dma before the sentiment models cycle down, it will knock my model down to a -1.5, and force a 20%long/80%cash allocation. I really don't want to see that happen.
I'm going to sell my UCPIX position today. It's done it's job already.
I meant to add from the perspective of 'nothings changed' (trying to stay OT here) while augmenting some hedges I noticed in the TIC data (http://tinyurl.com/2zn8z3) that the foreign flow of capital into US markets fell off fairly significantly this winter, equities in particular (December - TIC survey results are not particularly timely) and since foreigners tend to buy big names I added a small S&P 500 short position to my overall hedge.
I'm never net short these days but typically I'll hedge what I consider more vulnerable markets (small/mid-cap, emerging, etc.) but despite the proverbial 'rush to quality' that is supposed to occur when folks become scared it seemed a reasonable addition this time. Of course I could get my butt handed to me on that S&P short position (that will be offset by my longs) but since Roger's site emphasizes process I thought I'd mention it, FWIW.
"Nothing has changed fundamentally"?
Is that really so?
1) Bank of Japan really does appear dedicated to raising interest rates. That's pretty fundamental, and new for over 10 years.
2) subprime mortgages are a systemic failure.
Let's remember, of course, yield curve is still inverted.
When's the last time we had an industry-wide market failure and liquidity evaporation?
Last one I remember was merchant energy---after the dot coms.
Yeah, that one.
Who will be Enron of mortgages?
No, I do not believe it will be Fannie or Freddie---they are more tightly regulated. There are ideologically motivated reasons to bash them but the worst offenders are pure private-sector capitalists.
anon 910pm I believe you have have completely missed the tone of this post. Completely.
unless I am missing your tone.
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