Best Of the Web Today
The blogroll on the left are the sites that I read on a daily basis. All are excellent, and there are many more out there that I often read. Tonight I will point out the most thought provoking posts I saw today, and you dear reader can try them out for content if interested:
- Market Ticker-Karl Denninger does not post as often as he used to, but when he does it is an important read. His rhetoric is a bit over the top at times, but that is symbolic of his passion for the topic. He is also honestly trying to help the average joe or jane as well. Tonight's post is a beauty, and I recommend it: http://market-ticker.denninger.net/2007/11/something-evil-this-way-comes-part-deux.html
- Minyanville-Probably my favorite stop every day. Plenty of great stuff to read through today.
- Calculated Risk-Tanta and CR provide the best and most knowledgeable intra day analysis of financial ongoings. The comment section is also top notch.
- Mish at Global Economic Analysis-The best Macro analysis that I can find. Today he is on fire so just scroll down for a bit.
There are so many others, but I imagine most readers are like me and have a job, a home life, some personal interests, and the need for some sleep at some point!
Sentiment Does Not Rule The Universe
The market action over the past few days has been pretty wild. I have tried to catch some CNBC as well as read through some message boards (I know they are both mostly useless) to try and get a feel for things. What I have seen is that most market commentators and participants are right now building a case for stocks and the economy in terms of sentiment, not fundamentals. What I mean by this is that instead of trying to look at things through a lens of hard data, recommendations and predictions are made based on the old trick of trying to be contrarian. If the financials are being sold hard, now MUST be a great time to buy because sentiment is so strong against them. Home builders are a strong play because they are beaten down, so a turnaround is at hand.
The problem with this kind of analysis was born in the go go boom times of the Nasdaq bubble. Any dip was bought hard. Any move against any sector was a strong entry point. Like the US military, traders are armed and ready to fight the last war. This time it is different, but not in the way they think. The banks and lenders are in serious trouble. The problems they face right now are so bad and structural that a new valuation metric will have to be figured out. This is not a dip. This is not a sentiment graph that says there are too many bears so buy, buy, buy. This is a acceptance of a change in reality for the banking industry. The process has just started. If you cannot recognize the difference, you are going to lose.
There are too many technical traders out there right now. Bottom calling is for fools and the fools that follow them. The "don't fight the FED" line is only useful in "normal" economic conditions. There is nothing normal about the current mortgage, derivative, SIV, and commercial paper maelstrom. Look at any headline concerning bank loses and housing prices and all the stories will read the same. The common theme is "never before in history", "worst/largest ever recorded", "first time since THE GREAT DEPRESSION", etc. See what I mean? There is nothing anyone has a working model for going on right now. I am with Market Ticker when he suggests now is a good time for the small guy to sit it out. I do not mean stop following the financial world, I love it too much. I mean if you have a brokerage account that you like to use, maybe its time to take some off the table, pare risk, etc. I do not offer investment advice here, but that is my plan of action going forward.
Thanks to all that left comments (Kevin and Debbie, thanks!) on the last post. I do appreciate it.
Remember, Friday night is rock blogging night, so use the comments for any requests.
Have a good night.