Well yesterday was a swift kick in the 'ole backside. It's not even Labor Day in the 'States and it seems that risk-aversion is back in control. Did someone yell "everyone off the beach?" Well I didn't hear'em and I'm not worried. Remember our July letter that showcased a few simple themes on why it's better to be Long than still being on the sidelines. The economic world can only come to an end once per year (not including those that trade the GBP).
If we've learned anything over the last few months it includes:
-
Markets work the same way at the bottom as they do at the top. When you're talking stocks in the elevator with strangers, it's time to hit the reverse button.
-
August was certainly meant for the beach; time to test the limits of your suntan and have a few Heine's. The Augusts' of the last 2 years are distant memories and may never return in that fashion again.
This month we're keeping it short and concise, have a look.
|
Looking at the S&P 500 below, first off I'd always recommend looking at the weekly charts for your investment decisions. Daily charts are for short-term traders not investors.
The S&P has support at 950 before potentially 900 but the 20 day has already broken above the 50 day (log scale) and is trending higher. Volume has been declining but history will often disprove textbooks at the index level and show that the masses miss out and that volume will not lead the rally.
The chart below is courtesy of http://stockcharts.com/
|
JOBS
Sometimes anecdotal evidence is a lot more powerful than anything that we've ever created in the finance world. P/E's be damned (especially using FASB accounting rules). More useful would have been better off dropping your car off at the repair shop this spring understanding that the economic cycle is working itself out after seeing the non-recession bill.
Another example would be just looking out my windows and seeing the trash mounted meters high as kids come back to University and throw away their boxes from new laptops, wide-screen tv's and furniture. (what ever happened to books, keg-stands and computer labs?) No sign of retailers hurting around here, no wonder Staples and Best Buy have multiple stores within walking distance around here.
Speaking of jobs, remember last month when the NFP surprised to the upside, although we may be disappointed this time around the bigger picture is quite clear. The chart below compares the recession from earlier this decade (tech jobs vs.. finance jobs) and where we stand. The trend is quite clear and all the talent on the sidelines hopefully won't be there too much longer. All these comparisions to 1929 need to stop!
|
Lastly
Last month when I said to Buy, I did. Not to brag or bore with details, but let's examine two items that I bought in particular. The XLF which gained around 16% in August and some growth fund that is managed by a giant here in town that gained 2.2%.
Why did the giant underperform? Technology.
My theory has been to buy stocks that originally caused the recession on the boomerang theory which they have. That said technology actually led the stock market rebound this year and now it's stalled (tech loves Q2). Just look at Apple or Dell and let me know how much further they are going to go? Energy is certainly not leading, nor are Industrials, Telecom, Transport (which never will again in America), Utilities or even Health-Care or Retail.
We are still in a bear market correction but with everyone on the elevator talking about the same thing it may be time to get back in again.
Enough for now.
Ciao
|
|
