1/30/2013 6:15 PM ET|
Bull market or prelude to a bust?
Grumbling with the bears
As a bear, or as someone trading off of fundamentals rather than just price momentum, it's painful to wait for the turn. But as the 2007 example proved, patience can be profitable virtue.
In 2007, the stock market was hit as financial stocks were crushed by the fallout from the subprime bubble bursting. That was the catalyst the bulls couldn't ignore. People didn't know what it was like to invest in an environment where home prices were falling.
Similarly, we're about to experience what it's like when the government can no longer support a still-fragile economy with low taxes and ample spending. Earlier this week, Barclays Capital strategist Barry Knapp noted that Wall Street's hopes for earnings growth this year rest on the sectors most at risk from fiscal tightening out of Washington. With stock valuations at 2012 peaks, he believes "this may not be the optimal time to commit new capital to the equity market."
I share that opinion. This is not the time to take new positions, and you may want to book profits and move to cash or Treasury bonds.
I've taken it one step further and am recommending outright shorts in areas of emerging weakness such as AK Steel (AKS), Century Aluminum (CENX), and U.S. Steel (X). All are economically sensitive materials stocks that will be early casualties of a new downtrend on a realization that, in fact, we still face serious problems.
And if you think the party can continue, at least consider rotating out of cyclicals and into the defensive areas that were showing strength this week -- such as health care, consumer staples and utilities. They will help protect you if the next thing we see is a pullback -- or, as I fear, something much worse.
Meet Anthony Mirhaydari at the World MoneyShow
Is it time to give your portfolio its annual checkup? Then join thousands of investors like yourself at the World MoneyShow Orlando, which runs through Saturday at the Gaylord Palms Resort in Orlando, Fla. At the world's largest investor and trader gathering, you'll hear from MSN Money columnist Anthony Mirhaydari and dozens of other top investment experts. Registration is free for MSN Money users; just visit the registration desk located outside of Exhibit Hall F.
Live webcast from Orlando
Can't make it to Orlando? Anthony Mirhaydari's presentation "The Death of Investing" will be webcast live at 5:15 p.m. ET Friday. Register for the webcast at MoneyShow.com, then return to watch the event live.
At the time of publication, Anthony Mirhaydari did not own or control shares of any company mentioned in this column. He has recommended that his money-management clients short AK Steel, Century Aluminum and U.S. Steel.
Meet Anthony Mirhaydari at the MoneyShow Las Vegas MSN Money columnist Anthony Mirhaydari will be one of dozens of financial experts on hand at the MoneyShow Las Vegas, May 13-16, at Caesar's Palace in Las Vegas. And admission is free for MSN Money readers. Just click here to register, and click here to see what Mirhaydari plans to talk about. Be sure to check out Anthony's new money management service, Mirhaydari Capital Management, and his investment newsletter, the Edge. A free, two-week trial subscription to the newsletter has been extended to MSN Money readers. Click here to sign up. Mirhaydari can be contacted at email@example.com and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.
Meet Anthony Mirhaydari at the MoneyShow Las Vegas
MSN Money columnist Anthony Mirhaydari will be one of dozens of financial experts on hand at the MoneyShow Las Vegas, May 13-16, at Caesar's Palace in Las Vegas. And admission is free for MSN Money readers. Just click here to register, and click here to see what Mirhaydari plans to talk about.
Be sure to check out Anthony's new money management service, Mirhaydari Capital Management, and his investment newsletter, the Edge. A free, two-week trial subscription to the newsletter has been extended to MSN Money readers. Click here to sign up. Mirhaydari can be contacted at firstname.lastname@example.org and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.
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I agree. Wall Street is disconnected from the prevailing economic conditions in this country. Easy money through fed/treasury policy has only stalled the inevitable, with interest, Todays unexpected GDP data is , yes, the fault of Bush, Tsunami, Europe, Sandy, etc.. This gig will be up soon enough. The market is trader and computer driven. Not investor fueled. The volatility has a lot more to do with Wall Street houses and hedge funds short term trading than investors. Outside large investment entities, most retail investors are out and into gold or cash.
I am no economist but in 2003, I kept telling a friend in the mortgage brokerage business that the free for all in that industry was headed for collapse. It took longer than I thought but didnt yet understand how it was being forestalled by political and cozy financial arrangements, and collusion between Wall Street and Washington. Remember Fannie and Freddie? they are still here and engaging in the same practices that contributed to the meltdown-as is Wall Street.
While the fed is still in denial, or deception mode, Joe Blow is curtailing spending, ACE manufacturing is moving to China and successful companies are hoarding cash.
Globally, there is still more than $175 trillion in derivatives that have to unwind.
Hang on to your wallets, politicians are after YOUR money.
Like Fat Cat, i started my trimming Monday and more today. Am considering something i never thought i would in over 20 years.... all cash and Gold. Any idea what happens when Obama/Bernanke end their printing orgy? They are printing at the rate of 1 Trillion per year in the bond market. That is staggering. The other end of that is our massive deficit spending and one will effect the other.
At some point, as mortgageAndDebtFree says, rates will go up and the bond markets will correct this for us. The bond market is MUCH bigger than the stock market and will take a dump. What we pay for debt will easily go from under 2% to 5%+ MINIMUM and the interest on our massive debt will top a Trillion per year. I fear this to be worse than the first, as the dollar will also crap out.
Inflation, Inflation and more Inflation will bring us down. With less money from the private sector flowing into the economy, which we all know this is what keeps it stable! there will be a big crash. The government has been building up a false wall economy that cannot support itself (no strong foundation). Look for higher taxes to come as this is their last resort to put a finger in a leaking dike. THEY ARE OUT OF FINGERS!!!
Everything is overbought; too much, to quick; 10% retraction coming up!! Then see if the government orchestrates a soft landing to stabilize the markets; if they do and it succeeds, this so-called free market system is a sham, and it would be best to put your money somewhere else
@ vb_iron chef
The FED "IS" the current bond market.
The 'bond vigilantes', of whom we used to expect to get it right, and force a correction, are not in this market.
Low yield and little to no upside pricing; folks, get out of US Treasuries if you haven't already!
Anyone still believe Obama didn't raise taxes on the middle class?
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[BRIEFING.COM] The S&P 500 ended this week with a bang, roaring to a new all-time high on the back of stronger-than-expected economic data, influential leadership, and an ongoing appreciation for the Fed's monetary policy support.
The bullish bias was evident in premarket action as the S&P futures pointed to a higher start without the benefit of any definitive news catalyst. Stocks indeed benefited from a blast of buying interest at the opening bell on this ... More
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