The Bull Case

The bull case is that while there might be a double dip, stocks are already pricing a lot in. It is unlikely that we will see the type of forced selling that we saw during the last bear market as the major players are no longer leveraged. There are many low price to free cash flow companies that can buy back stock or buy other companies. At the same time investors and hedge funds have low equity allocations. The question becomes where will the selling come from?

I believe the economy will get much worse over the course of the Summer. That is enough to keep me away from the long side for anything more than a trade. But the bull case has merit and I don't think the short side is a slam dunk either. A few weeks ago I said the best course of action for most investors is to stand aside this Summer and if the market falls apart to come back in the Fall and pick up the pieces. I wish I would have followed my own advice. Sitting on ones hands is the most important and hardest things to do in investing.

6 comments:

Anonymous said...

If markets tank this summer the fed will cut spurring a rally.

Theres already talk of another stimulus. With elections this fall it's not out of the question.

There are other things they will do to prevent a collapse.

Anonymous said...

http://www.bespokeinvest.com/thinkbig/2010/7/1/state-default-risk-and-a-comparison-to-sovereign-debt.html

Anonymous said...

Today, I sold some of my shorts for a nice profit and i've been averaging down some of my longs that pay fat dividends. Also dipped a toe in some risky leveraged longs. Not much though.

Chaos! said...

We are on the launching pad.

Tsachy Mishal said...

Chaos! I am tempted to jump back in but am being extra careful because I just got nicked. The high ISE number is what is stopping me. What do you make of it?

Onlooker said...

I don't know Tsachy. I'm still wary of this being a market where oversold indicators and sentiment come off of oversold and bullish readings just enough to set up the next sell off.

Between the ISE readings and the muted VIX response, I read complacency. But it's tricky at these bottom turning points, as you know.