Market Frustrates Bulls, Gold Regaining Mojo

Thursday, June 24, 2010

Businessweek Bear CoverBusinessweek article a bit depressing

I just finished up last week's issue of Bloomberg Businessweek that featured the cover article chronicling and interviewing the prominent bears who gained notoriety during the 2008 market crash. For the most part the article is somewhat dismissive of these few people, more or less labeling them as perma-bears. In terms of the likes of Marc Faber and Nouriel Roubini, I couldn't agree more, even Nassim Taleb though Fooled by Randomness was a brilliant work. Yet, they misstate Meredith Whitney's record as I distinctly recall her interview on CNBC in early 2009 advising clients to cover their shorts as she did not see much more downside. Not only that great call she recommended Goldman Sachs (NYSE:GS) just a few months into the 2009 rally and then told clients to sell basically at the top.

The quote below is an excellent appraisal of the constant bull-bear debate:
The bias is inherent in the situation. The problems are known. If you write for a major publication, you are rewarded for analyzing the negativity. If you go on TV, you are expected to parrot the analysis of problems. This makes you seem smart.

By contrast, the solutions are vague and unknown. If you even talk about them, all of the "hot shots" are skeptical.
(A Dash of Insight)
The fact of the matter is there are a lot of clouds on the horizon. But when will there not be? And the solutions are unknown otherwise the problem would already be solved. So in a lot of ways distinctly diagnosing the problem looks smart while offering possible solutions just looks blindly hopeful and optimistic.

A brilliant portfolio manager I recently spoke with argues that US firms have not seen a real recession in a couple decades so they have not looked inward. This recession has forced firms to discover new efficiencies and this is clearly reflected in the massive increases in productivity over the last few quarters. Hiring will turn when small businesses turn around and that will occur as credit lines continue to open up.

Gold makes higher low, bounces strongly

Gold was a winner today after NYSE:GLD tailed through $120 yesterday and then rallied today before fading late. My nerves were tested a bit but I held on and got rewarded today. The brutal stop out fall on Monday and into Wednesday may have cleared out overhead resistance and opened the path of least resistance to the upside. To reiterate, I'm looking for first target at $130 in NYSE:GLD with stops at $118.80.

Equity market frustrates early bulls

It appears that I joined the large swath of eager beavers trying to buy the $1,075 level. My losses were limited as I bought well and simply held my position up and then right back down as the market failed back through lows of the day. I will attempt nearly the same trade tomorrow but it will be a bit trickier since the swing trade will require weekend risk.

Disclosure: Long GLD.
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