Dale, I enjoyed Willoughby's analysis. Provides a picking list of short canidates. He did seem to focus on a limited sphere of companies however.|
More interesting was Ablesons column this week. Two graphs appeared in the print edition that won't paste over, however its verbalized below.
And, as both Goldman Sachs and Merrill Lynch have had recent occasion to observe, a strengthening global economy is beginning to put a strain on commodities. Not only oil but various key metals and farm products as well. Merrill claims, by one trusty measure that excludes energy, "we are in the biggest bull market for raw commodities in the last 25 to 30 years."
Even if Greenspan & Co. are not especially in a sweat about the strains that a strong global economy is starting to place on commodity supply and prices, they are probably not oblivious to them, either. But more to the point, their distress at the strains generated by a booming stock market on a booming economy is becoming increasingly evident and vocal. Any way you slice it, not bullish for the stock market.
Which leads us to those two charts that adorn this page, both courtesy of the estimable folks at The Bank Credit Analyst. The first shows that the public's direct equity exposure is at an all-time high. The other, that mutual funds' cash reserves are at an all-time low.
So if the efforts of the Fed finally manage to take hold, a slumping stock market is apt to exert a double whammy. First, because the funds are so shy of liquidity, they'll have to shed stocks to meet a spurt in redemptions, thus worsening any market decline.
Secondly, because investors are up to their eyeballs in equities, they're bound to cut back their purchases sharply, not only of stocks but of real stuff as well, in the process furnishing a hit to the economy.
We don't envy Mr. Greenspan. Especially in an election year.
My take is numerous techs are grossly overvalued, kept afloat by the influx of fresh money. The buble is about to run out of hot air. As the flow slows lookout below.
The confusing reversal this past week with Dow and NASDAQ was a panic reaction. Unfortunatly the trouble for the Dow companies has only begun, with last weeks rise being a short covering rally and panic reaction on the part nervous tech investors looking for saftey (in equities :?).
Shortly it'll be evident that investors in general have become complacent about the risk in equities.......cash or high quality bonds, take your pick.
Add to the mix margin is at a record and the potential repaitration of Japans investment in the USA (Japan is strengthening in 1st qtr 00.....which will reverse the 4th qtr data)
Shorts are going to have a party over the forseeable future.
Unfortunatly, our economy is headed to the slippery slope, faster than wall street thinks.