4 CHARTS DEMONSTRATING A MARKET THAT IS HOME FROM THE HILL IN THE WEEK AHEAD
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WHAT THE IPO MARKET AND PHASE 4 STOCKS ARE REALLY TELLING INVESTORS ABOUT A MARKET TOP
What follows is the "Looking Ahead" section of my monthly report to investors to be released in the coming days. There are enough misconceptions, misinformation and downright naive analysis floating around about an impending top or potential bubble forming that I felt this deserved to be separated out on its own. Being that gauging short, intermediate and especially long-term tops has become an obsession among the most recent generation of market participants, it is worthwhile to occasionally divert attention away from the micro and look at this secular bull market from a reasonable, measured perspective. This perspective relies heavily on lessons learned from secular bull markets of the past, with a special focus placed on the secular bull of the 90s. Why the 90s? It was the last innovation led rally that was guided greatly by technology, with an emphasis on new and emerging companies revolutionizing the way we communicate personally and professionally. It was a rally that was misunderstood, doubted and criticized nearly the entire way up. It was a rally that was resilient through numerous seemingly disastrous macro events. It was a rally that was also resilient through consistent and persistent overvaluation. The bull market of the 90s was born from two distinct negative events that influenced psychology (and monetary policy, for that matter) greatly. The 1987 crash effectively ended the secular bull market that started in 1982. The psychology of the investor class was further damaged by the recession of the early 90s that was exacerbated by events such as the Gulf War, rising oil prices, high unemployment and substantial deficits. These condemnatory events separated only by a few years resulted in a dramatic shift in investor psychology from what was the pervasive bullish sentiment of the mid-80s. This foundation of skepticism and fear provided the perfect foundation for what would be a historic rally throughout the 90s, taking the S&P 500 up some 300% during that decade. What has occurred from 2000-2012, effectively set the stage for what we are experiencing now. There is no possibility of a substantial secular bull market being born from a point of outright optimism. Secular bull markets are born from the defeated psychology of investors who have little hope or desire of creating anything substantial out of the financial markets. Instead they have come to focus on cash preservation and alternative asset classes that are driven by the desperation of the avoidance of further financial pain. Due diligence becomes a choice phrase. Risk aversion becomes a wise choice. There is no deviating from this path until the reality of a bull market becomes so cemented in the investors mind...
5 CHARTS THAT WILL BRING THE UNIVERSE INTO THE PALM OF YOUR HAND FOR THE WEEK AHEAD
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5 CHARTS THAT ARE MIGHTIER THAN BOTH THE CUP AND THE SWORD FOR THE WEEK AHEAD
NASDAQ 100 S&P 500 DOW TRANSPORTS...
THOUGHTS ON DAN LOEB, FACEBOOK, THE CURRENT MARKET, THE FUTURE MARKET AND LESSONS OF THE PAST
- A pretty scathing article about Dan Loeb published in the December issue of Vanity Fair. I knew Dan Loeb before he was Dan Loeb, instead referring to himself as Mr. Pink. Mr. Pink was active on the Silicon Investor message boards in the 90s, having a good sized following among investors. Even back then, he was as abrasive as anybody you would ever come across. Message boards in the 90s were like the Twitter of today. In fact, I often think of Twitter as the modern version of the message board. The Dan Loeb of the 90s was a talented individual. He broke down the case for investing on both the long side and the short side of companies in a well thought out manner. His analysis was typically accurate. You could immediately tell that he got a certain joy out of shorting small-cap names that had a questionable management team or operation in place. He did go after incompetent and in some cases, criminal management teams. He did have help in discovery, however. There were others that participated in the same game of overthrowing supposedly corrupt CEOs. Most notably, Anthony Elgindy aka Anthony@Pacific on Silicon Investor. Mr. Pink and Anthony@Pacific did have a fairly healthy online relationship before Mr. Elgindy was convicted and sentenced to many years in prison for a bunch of financial related crimes. He was recently released, I believe. It seems that with all the enemies Dan Loeb has made over the years, we may be in the process of witnessing the good old American sport of “bring you up just to tear you down,” with this Vanity Fair article kicking off the parade. Pretty sad if this is the intention, as I think whatever success he has achieved he does deserve, regardless of whether or not you agree with his “pull no punches” investment methodology. - If you are a believer in the FB/YHOO correlation study (I don’t know why anyone wouldn’t be at this point given how accurate it has been in calling FB from the middle of last year), then this is for you. According to that study, Q4 for FB should be flat. I would say a range between 45-55, which is what the stock has been carving out here recently. According to the study, FB should begin moving up again in Q1 2014, headed for close to $100 before the end of 2014. - If you are a believer in October ending badly, then I have something for you too. Today was bearish anyway you look at it. The action in the Russell was especially atrocious. The action in the S&P wasn’t...