Good News For Large Caps

While I believe large caps trade at more attractive valuations than small caps, I have not thought it a good idea to make a large over small cap bet. The reason being that the government was planning to sell their stake in AIG, Ally and GM. A few months ago they were hoping to raise $50 billion from the sale of all of these stakes. I thought $50 billion in new supply for the large cap market would be a lot to digest.

The AIG offering has passed and they did not sell nearly as much as they hoped. The Ally IPO was pulled and now the government might not sell their stake in GM as the price is too low. This might give the large cap market some breathing room. On a long term basis I believe large caps should outperform and the short term outlook is looking a lot better as well.

1 comment:

Anonymous said...

It will be interesting to see how this GM stock story will play out. Will the stock receive real institutional sponsorship beside talk until the government held shares get into the right hands.
...Many years ago CNX was an excellent short play until 20 million shares exchanged hands
then the bull market started in the stock.....