Wednesday, November 21, 2007

Market Erosion

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Seems to be an interesting situation now with the market as a whole... we have moved from the panic type of selling to simply a state of erosion and "giving up" - grinding down day after day - Chinese water torture if you will.

Wait, Chinese water torture is up 150% this year... too expensive. More like Indian water torture... wait that's up 120% this year... gosh, can't a guy find a reasonably priced water torture around here anymore? Ok let's go with death by a thousand cuts - I believe that still offered free!

Anyhow, this is more of a type of market that just grinds on you and takes out all hope slowly but surely. I can just imagine the slumped shoulders all over New York City. I keep referring to it as Ground Hog day because every day is about the same. But once we broke that S&P 1440 and did not recapture it quickly, the trend down just reinforced itself.

Eventually it will turn... believe it. Times like this grow hair on your chest (well I suppose that is a net negative for female readers but....) Just remember times like this when your investments are golden and you are making out like a Fed printing press, and remember times like that (the good times) in times like this. As bearish as I am on the US economy, nothing goes straight down and these counter rallies that should come should be good times to lighten up if you feel sick to your stomach. Some stocks are actually good values now (just need some buyers) and expectations are getting ratcheted down by the day; which is also good. While I think 2008 expectations are still too high, they are now a lot more negative than they were even 1 month ago. I continue to be a bit bemused by seeing stocks that create wonderful earnings and provide bullish guidance get hammered nearly as bad as the financials and retailers but this is where we are now, where good, bad, and indifferent get punished.

The good (?) news is we are now approaching mid August lows, but its in a more orderly fashion than that time frame. While it is not a fun time from the long side, in mid August the declines in individual names were even more harsh as hedge funds were liquidating their strong positions to provide liquidity for redemptions. I don't know if that is a good or bad things that we have not reached that stage - one could say its good because things are not so desperate - or one could say its bad because we have not reached that point of desperation.

There are still plenty of stocks trading stubbornly above their 50 day moving average and I am trying to populate the fund with those names. Eventually when people want to buy stocks again, these are the names with the fundamentals, and should be the names people are drawn to.

Either way, have a good Thanksgiving!




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