To see historic weekly fund changes click here OR the label at the bottom of this entry entitled 'fund positions'.
Cash: 44.6% (vs 34.2% last week)
33 long bias: 44.9% (vs 37.1% last week)
9 short bias: 10.5% (vs 28.7% last week)
42 positions (vs 39 last week)
Weekly thoughts
First down week after 9 consecutive winners in the NASDAQ (best streak since the 1999 bubble), and effectively the same in the other major indexes as well as the only losing week they had in that time frame was roughly half a percent. I won't rehash my technical thoughts since I laid it out mid week in [40,000 Foot Point of View of S&P 500] and it is represented by the chart below...
To that I'd like to add this chart which shows the uptrend's channel...
In the "40,000 Foot" entry I noted multiple support area - first at the 20 day moving average which we bounced off of both Thursday and Friday and below that all important S&P 875. Now what happened late in the week was despite bouncing off support, we broke down below the lower end of the 'channel' that bracketed this rally. Bulls will want to see the indexes close back within the channel quickly ... or it will start to act as a resistance area. Again, I'd like to repeat I hate paying this much attention to the overall market and charts but we do not trade in a vacuum (ever) and since summer 2008 the overall market has determined 80-90% of the move. Individual stock selection in my opinion has become moot during this time frame so sometimes I wonder why I even bother with individual stocks in this atmosphere.... the student body either runs left; or right. With that said, if we do begin to break down below S&P 875 are we just resigned to another 20%+ move down? Are we just going to ping pong between what the press describes as "bear" and "bull" markets (20%+ moves)? Rhetorical questions ... personally it's still a bear market; we've had multiple 20%+ rallies since fall 2007 - they are only bulls on paper.To summarize economic news... blah blah blah... blah blah blah... green shoots. Further, we can see blah blah blah... blah blah blah... green shoots. That's pretty much been the market's attitude for well over 2 months now. All news is good news... as we wrote entering 2009, we'd swing from hope to reality and back... and we have. Trust me, on the next downturn a lot of the same news that has been completely dismissed will be rehashed and then it will "matter" again. The reality is the news has little changed, it is just a matter of if we decide to play hear no evil, see no evil, speak no evil or not that week / month. The debate has shifted from "where does this freefall end?" to "what sort of recovery can we expect?" My thoughts are well known, and I'll continue to say (as I have since 2007), despite all the government's efforts to literally hand off money to anyone with a pulse, the big surprise (to the market) will be consumers lack of demand as we exit this era. The current "green shoots" from this perch are tax returns, combined with house ATM, combined with an increasing number of people living in homes "rent free" while waiting to get kicked out, combined with government throwing many in every direction (and I include the Federal Reserve in government although technically it is not). For those of you who are subscribers to RealMoney, I'd suggest a post from Robert Marcin: A Gimmick Economy for a Wimpy Populace. It essentially summarizes many of the thoughts seen on these virtual pages - effectively instead of addressing our structural problems we are "buying time" by repeating, and indeed exaggerating, the same policies that got us here. We somehow believe there is no cost to it... as ostriches who put their heads into the sand often do. Anyhow, blah blah blah... green shoots.
Position wise, with the market at a crossroads I've lowered my short exposure as the market went down substantially and we were able to buffer a large long position quite well with our hedging. While I did some buying into the dip, I'll change course if S&P breaks 875 on a closing basis and cut back position weights and add to short exposure. Frankly it is difficult to tell what to short anymore because there are so many conflicting thesis running around - one day its the return of commodities, the next day its the return of the consumer, the next its the return of corporate IT budgets... it's all theoretical and people trying to front run trends that are nowhere but in people's imaginations for the most part. I'm sure in the weeks to come I'll be looking at stocks I was forced to cover due to rising 15-20% a day, going in exactly the opposite direction as hope is replaced with reality. But as always, timing is the thing... guessing the market psychology these days is extremely difficult since it changes by the day.
One area of strength last week were agricultural names, and I lightened up some fertilizer exposure late in the week.
China appears to be buying every commodity under the Earth as a replacement for lousy US paper currency, so maybe foodstuffs will be next. So far nothing in the earnings reports or guidance indicate any iota of real recovery in the fertilizer space, but then again you could say the same for natural gas and we saw a monster move in some named the past few weeks. I will continue to ask each week, at what point does surging commodity prices stop being something to be gleeful about as a sign of global growth (which it is not, it's all China) and instead be seen as a major headwind for the globe's shoppers: Americans. We'll see when that switch is made if indeed the combination of China and Ben Bernanke is successful in stagflating us to prosperity.
p.s. wonder if Ben can inflate the deficits right out of the states budgets? Do we even care anymore or are we just waiting for the inevitable bailout by the federal government along with US taxpayer backstopping municipal debt? Same solution to every problem in the country...
