Friday, September 18, 2009

A Late-Summer-Week's Waiting

What a week!  Or should I say, "I was napping - what did I miss?"

The answer is not much.

Sure, the S&P 500 and Down logged a 2% + gain for the week.  Sure, gold held above the fabled $1000.00/oz mark.  It currently sits at $1006.50

But these are all things that we at Investophoria expected.  This is the last hurrah, the final call for all the new bulls to pile on board.  The smart money started walking away some time ago and now this rally is left to the speculators and those who "hope".

Insiders had huge net outflows over the last 6 weeks.  The largest on record for some time - these folks who know far more about the state of their company's affairs than we ever could.  They were net sellers to the umpteenth degree!  For the month of august, insiders sold something like $36.00 worth of shares for every $1.00 they bought.

Doesn't sound like those in the know are feeling to rosy, does it?  That's about 18 times the average inflow to outflow for insiders!

It does get better though.

Another little tidbit to remind all readers that the bubble days are back:

"IPOs return.  8 Companies want to raise $3.7 Billion"

That's right - 8 Initial Public Offerings in a single week!  That is more in a single week than was average during the absolute top in the markets (the average was about 5 per week)What's more, there are now 89 companies in the IPO process.  Back in March, at the market low, there were only 29.

IPOs are a sign of timing - as in they prey on over-heightened sentiment.  The more IPOs out there, historically, the worse the timing is.  Remember the tech-bubble era?  The mania is back, folks.  Which means the hangover is most likely not far behind.

As usual, a picture says a thousand words.

This should raise a few red flags for anyone long out there.  Our strategy remains the same - we expect a very large and ongoing plunge in all asset prices across the board.  Housing, Stocks, Commodities, Warrants, Gold and Silver, Junk Bonds, etc.

Cash is king. Right now.  Or it's nearest cash equivilants - namely short term treasury bills.

We expect the market to turn within the next 30 days, and begin the larger and more violent of the declines as realism sets into sentiment.  The opportunity to buy will be sooner than we think (we think).  But it is most certainly not now.

I'm going to leave you folks with a story.  A short story, but one well worth paying attention to.

One of the clients I invest for had a meeting with the banker that handles his main business affairs early this week.  This banker has been in the industry for many years.  He's the type of banker who only handles the "important" clients.  Let's call my client Andy.

During their meeting, my name happens to come up.  "So, Andy , how are things going with Derek?  Has he made you any money in the last year?"

Andy smiles.  "Yes.  We are up 48% since last September".

The banker at first thinks Andy is lying.  When he finally realizes he is not, he leans in.  "How did he make 50% in the last year?  Everyone I know lost his a huge amount!  Even I lost 25%!"

Andy shrugs.  He knows my investment strategy and "contrarianism" as well as he can with my few explanations.  But how do you put that into a few sentences.  He can't.

"Well," says the banker, "what's he invested in?"

Andy smiles again.  "Actually he's just moved me into about 85% cash."

The banker does a double take.  "Cash!?  Everyone I know is getting into the markets right now - it's the only place to make money!"

Andy shrugs again.  "I trust his judgment," is all he says.

I met with Andy a few days later for lunch, to go over our game plan in the coming months.  He relayed the story to me.  At the banker's last line, I just had to laugh.

"That, Andy," I said.  "Is exactly the point."

Being a contrarian is not an easy life.  Everyone you know will surely think you are crazy at some point or another, or wave off your opinions as nonsense.  One must learn to have nerves of steel - to keep that emotion in check, because just as the market is psychology, so are your day-to-day interactions. 

It's fine to listen to what other people have to say, but remember to do your own research, form your own opinions and conclusions.  The results you see before your own eyes have not gone through another human filter.

Stay true the course, readers.  This story has many pages and plots to play out. 

Enjoy your weekend!


No comments:

Post a Comment