July 13, 2007
Here's a few reasons I see for stocks going up recently:
1) Investors frantically getting out of depreciating dollars and into stocks. One share of IBM going up while dollar is tanking means it takes more dollars to buy that one share of IBM, so IBM shareholders may feel "richer" when indeed they may be poorer. And meanwhile I paid $18.00 for 12 chicken wings here in London the other day... Get it?
2) Bond investors, especially mortgage-backed CDOs and US treasuries, selling their bonds and moving funds into stocks
3) Overleveraged hedge funds, on the verge of blowing up and shutting down, rushing into stocks short term, trying to get the sheeple excited before they get the F out of Dodge
4) Venture cap money is sloshing around in a big way buying up public companies. Buy-outs and rumors of buy-outs driving stocks higher and higher
5) Dead real estate money still looking for a place to go and stocks are a natural
6) Classic flight to safety after the CDO S&P Bear Stearns news with the multinational mega-caps leading the way
7) Hank Paulson and the PPT working overtime
Yes, this will all end and end badly. But enjoy the ride until it does. One BIG fallacy is the view of most that they can ride the wave and get out at the first sign of trouble. What happens when everyone wants to get out at the exact same time? Anyone remember September 12th? Anyone remember Black Friday? Anyone alive in 1929?
My COP, EWJ, EWZ, EWG and my miners are doing fine, I covered my homebuilders last week (pigs get fat hogs get slaughtered, gotta love 100% - 200% gains), I enjoy 5.5% to 6% CD's and savings, and I'm short IndyMac, Countrywide and Retail Holders today. And I wish I had picked up gold at $640, was waiting for my $630 target that never came.
With oil coming up on $80 again, CDOs and hedge funds blowing up, consumer confidence plummeting, housing prices in freefall, and wars and rumors of war all over the place, it feels dangerous out there.
How 'bout you? Where's your money? Are you on offense or defense? And do you understand how the dollar collapse affects you?