Monday, September 10, 2007

Monday Morning

Will someone please explain something to me as I am not that bright. When the tech bubble was in its full bubblicious glory and I (among countless others) complained of the disconnect regarding the underlying fundamentals I was told and heard countless times, "they don't matter", "it's the new economy it's different this time", and you don't understand tech and that old yardsticks don't apply". Little did the bulls realise how much they would matter eventually.

Now here we have the bulls pounding the table about stocks and valuations being cheap as they use the metrics of earnings estimates when in this speculator's opinion these estimates are far too generous given economic conditions. I love how the perma-bulls don't care a whit for fundamentals are missing or are ignored on the rise up yet whine about their importance on the way down. In the debacle of 1929, the economy measured by GDP recovered and bettered its pre-crash numbers by the late 30's yet stocks did not reclaim their high water marks till the 50's.

Are we to learn something from this? You bet ! That earnings and fundamentals will not matter a hoot when investor psychology has changed from bull to bear. In bull markets all news is bullish and in bear markets all news is bearish, remember, news conforms to the tape. How else do you explain a 2 for 1 stock split being a bullish event. I have been in this discussion more times than I care to count. The same people who would tell me to jump in the lake if I cut their 8 slice pizza into 16 smaller slices yet attempted to charge them a higher price will willingly ignore this fundamental law of nature when it happens in the stock market and readily pay up.

Also, markets are far from being rational beings as they are constantly swinging from one extreme of over optimism to over pessimism. So while the bulls rejoice in the swing to over exuberance they lament and whine over a natural and healthy swing to over pessimism. If they are the shrewd bargain hunters they say they are they should welcome this as their opportunity to take advantage of this blatant mispricing. Unfortunately the perma-bulls know only how to invest in bull markets and have no clue as to speculating in neutral or bear markets which take up 2/3's of market time.

Gotta love the gift on Intel this morning. Are you still listening to these people. Its called disinformation. These are paid cheerleaders, whether they be analysts, brokers, company insiders and the media alike. You need look only at the unfolding disaster in the real estate market to figure out that paid shills of NAR (National Assoc. of Realtors), agents, brokers, the housing industry, etc all spouted endless lies and anyone who following this self serving advice is in a world of pain. Look around you, do your own homework, educate yourself. You really think the Intel insiders are buying into this 'upward guidance' this morning or do you think they are selling? I posted the chart on Friday's blog and I encourage you to have a look. This way you won't be so upset when in 5 short weeks (or less) Intel recants the entire news, can you say Washington Mutual.? Good trading to you all.

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