May 18, 2008
Here's the S&P 500 chart for the past three years. You'll note that most HP'ers went to cash last fall, and avoided the carnage through March. And then many of you have posted here or written me that you've gone back in and scooped up some bargains recently. Nice. And of course, a lot of HP'ers made a lot of money shorting REIC stocks these past couple of years. Again, nicely done.
I don't give stock picks here because when I have in the past (short or long) all we get is daily "HA! I told you! Countrywide is ROCKING! DOPES! CFC to $100!" kind of garbage. And many of us have been wrong about the general market before - thinking that it would fall further and earlier as housing crashed, although any stock connected to real estate and lending did.
So I want you all to be clear over the past few weeks that I've modified my neutral stance. Previously I was a picker, and not a bull and not a bear. I recommended buying good companies with good earnings with good P/E ratios and good future prospects. But now, when it comes to stocks, I'm a bull and have been buying 'buy and holds' with both fists over the past month and change. The last straw was Bernanke's bailout of Bear Stearns, which sent a message to the world that moral hazard is not a concept known to the US Fed.
So call me Larry Kudlow, call me Jim Cramer, call me what you will, but when it comes to good stocks - not any stock, not all stocks - good, solid, well run companies in thriving global markets, I'm a bull. I'll throw out one name so you know the kind of stock I like: Apple. 'Nuff said. (disclosure - I own AAPL of course). Also most of the stocks I own are foreign, or multinationals with significant foreign exposure.
So why the change in general outlook?
Because I firmly believe that Ben Bernanke and the federal government have fully committed to inflating a new stock market bubble, to bail out the housing bubble, which bailed out the last stock market bubble. And that's just the way it is. We're a bubble economy, and we need financial speculation to drive income and tax growth since we can't do it with jobs.
Reckless central banks around the world are also on board with The Next Bubble, which as you can all plainly see is causing soaring inflation, but so be it. Don't fight the Fed(s).
America has lost its manufacturing base. We're $53 trillion in debt and counting. Our currency has been debased (which artificially masked stock price declines, but not a lot of folks understand that). Our incomes are flat to declining. And damn, we're good at causing bubbles. And we're good at passing off the pain and day of reckoning to future generations. One day, that day will come. But thanks to "moral hazard? what moral hazard?" Bernanke, and the free spenders in DC, that day will be pushed out again.
The stock market may go up, it may go down, it may crash tomorrow, it may have wild days and weeks both ways. And you're supposed to "sell in May and go away" don't forget. So whether you're a bull or a bear (or neither), don't bore with the hourly and daily updates on which way things are going. But do feel free to share what companies you like and why.
And remember, stocks are not houses, and it's the P/E stupid - it's always the P/E stupid.
House prices have a long, long, long, long, long way to fall. Inventory is still massive, people can't get loans, foreclosures are soaring, it's significantly cheaper to rent than 'own', consumer perceptions have changed, and the massive fraud still has to be cleansed from the system.
Housing prices will indeed bottom one day. But that day is not here, not by a long shot. It's the P/E stupid - whether it's a stock or a house. And stock P/E's look sooooooooo much better than housing P/E's right now.
Finally, DON'T DO ANYTHING WITH YOUR MONEY BECAUSE OF SOMETHING YOU READ ON THE INTERNETS. Do your own research, make your own decisions, and have only yourself to blame - for acting or for not acting. Just like you did with the housing bubble.
Good luck out there HP'ers. Cash was king. Go make yourself some money with your money, let us know what you're up to, and if you agree or disagree.
Meanwhile, watch the market crash next week. That's how it works, right?
Posted by blogger at 5/18/2008