Cash is probably becoming more valuable
Steve Cook on Disciplined Investing


Have You Seen This?


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Have You Seen This?


   This Week’s Data

    The October leading economic indicators rose 0.3% versus expectations of a 0.5% increase.

    The November Philadelphia Fed survey of general business conditions jumped to 16.7 versus estimates of 12.0 and 11.5 recorded in October.


    A different take on our trade deficit with China (short):

    This might surprise you. The US share of world GDP has been constant to up slightly over the last 40 years (graph):
    Signs of poor economic data coming out of China (short):

    The Fed just keeps on pumping (medium, must read):

    And velocity is now starting to rise (medium):

    More on the coming problems in commercial real estate:



Harry Reid’s new math (short):

  International War Against Radical Islam

    One last thought from Charles Krauthammer on the trying of KSM in NY (long):

The Market

    The old saw that relates to those who never get it goes ‘a day late and a dollar short’.  I re-wrote that yesterday by being a day early and a dollar short; that is, as I was delivering the judgment that it appeared that the S&P had successfully challenged the 1102 prior high and re-established an up trend, stocks were setting up to head lower--and they did.  Clearly, nothing makes clearer the worth of demanding time and distance following the breaking of a trend and declaring it over than the pin action this week. And there is no clearer example of having a great strategy but executing it poorly than my call.

    Of course, being wrong is an inevitable part of this business.  The key is to act incrementally (in this case, we bet 2.5%) so as to avoid the performance killer--a big loss.  In addition, the steps we took were part of a longer term strategy of shifting our Portfolios’ exposure out of the US into foreign stocks.  So they would have happened anyway.  Nevertheless, my rationalizations aside, it was still the wrong call.
    To make matters worse, me altering my call on the S&P’s trend yesterday and looking the fool isn’t nearly as frustrating as not being able to then point to a definitive alternative.  As it stands, I can’t say with any confidence technically whether (1) the real trend is a trading range like I thought originally [the S&P closed below 1102], or (2) in fact the S&P did re-establish an up trend and yesterday was a very short term option expiration related phenomena on the way to higher prices [the S&P is still well above the lower boundary of a re-set up trend, if that is what has happened]. Hopefully, the Market will provide some guidance soon; but until it does, I lack any conviction so I am returning to my ‘Market schizophrenia’ scenario. 

    Bottom line, the DJIA (10332) remains in an uptrend (10034-11955); while I have no clue about the S&P (1094), Volume did pick up a bit yesterday (mildly negative); the VIX traded up but remains in a trading range (neutral).  The dollar was up, stocks were down, gold was up, oil was down; I don’t know what that means except that the dollar/stock-gold-commodity trade once again didn’t work.

    At the risk of venturing another opinion that will be quickly slapped down by the Market, nothing has happened to invalidate my longer term concerns about the economy (sluggish growth, inflation) and equity valuations (they are close to Fair Value).  And my conviction is growing that stock prices have reached the point that those concerns are becoming sufficiently appreciated by investors in general that the easy money has been made in equities--at least for a while.  The task remains to figure out whether stocks are going into a prolonged period of either trading sideways or ascending at a dramatically reduced rate.  As my actions this week suggest, at the moment, I haven’t got that part worked out.  Either way cash probably has increased in value.

    TraderFeed’s thoughts:

    And Trader Mike:

    Additional thoughts on gold (chart):

    And Marc Faber’s thoughts (short):

    NASDAQ capitalization as a percent of GDP (graph):

       Thoughts on Investing--More excerpts from The Money Game

    But the market does not follow logic, it follows some mysterious tides of mass psychology.  Thus earnings projections get marked up and down as the prices go up and down, just because Wall Streeters hate the insecurity of anarchy.  If the stock is going down, the earnings must be falling apart.  If it is going up, the earnings must be better than we thought.  Somebody must know something we don’t know.  With all the analysts and all the research and all the statistics and all the computers, it is still possible to be  51% wrong, and you can do better than that by flipping a coin.

Posted 11-20-2009 8:29 AM by Steve Cook