Monday, July 6, 2009

Reflation Trade Bludgeoned this Morning

The crowded reflation trade of a month ago is emptying fast - as I said then, once this turns it will end badly since your fellow "investors" are not fundamentalists but mostly "hot money" types. When you are buying things on "thesis" with no real fundamental evidence other than "charts are looking good", once those program traders (and HAL9000) turn on you, you have no fundamental reason to be in the stocks. This however shows why it is so hard to be an investor rather than a strategist - you can know the move up was based on hot air, but fighting the move 2 months ago would only cost you major money - and you look foolish while everyone says "hey the stocks know better than you do! The market is all knowing!". And figuring out when reality sets in (and it's time to short) is also hard to time. So you can be conceptually correct, but placing orders (shorts) correctly so that you are not steamrolled by a bevy of snorting bulls is problematic.

That said, the downturn is now going very fast and I'd expect a bounce somewhere.

Things are so bad Freeport McMoran (FCX) is down on an upgrade.

Some names to throw out there...

One name showing some signs of green early is Monsanto (MON) which is very overdue for a bounce, even if its of the dead cat variety.

No positions

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