Baby Steps : Part Two

I have further removed some hedges. I am saving the rest of my ammo if we break 1100 on the S&P 500.


Anonymous said...

i understand the contrarian sentiment indicators that you use, i also understand the philosophical idea that if everyone isalready on the put/sell side , there are no more sellers, so the buyers are supposed to swoop in, BUT as the stock market is a forward looking indicator, and the future looks so bleak,-- ie greece, the economy,---why should there be buyers? moreover, how does a 2008 style meltdown you have any indicator, that lets you know that it probably won't happen?...thanx for your time

Tsachy Mishal said...

A few thoughts:

I am unsure about the economy. My longs are defensive companies that I believe to be undervalued regardless of what happens to the economy. For example, Vodafone has a dividend yield of 8% and has a free cash flow yield of over 10%. I dont see an end to cell phone usage, even in a depression. Vodafone is my largest holding. I am not buying stocks that are highly dependent on the economy. The nice thing right now is that defensive companies in many cases are selling as cheap as cyclicals.

I have found that most of the time it pays to buy when sentiment is this extreme. There will be times when it does not but far more times when it does. I am not in over my head so I can withstand being wrong. But hopefully even in this case I will be right over time because I picked the right companies.

I dont think this is another Lehman because the Europeans are setting up a 400 billion Euro fund. That fund needs to run out before this is Lehman Brothers.

I think the memory of Lehman Brothers has everybody selling. I have underestimated this effect but I believe it is creating an opportunity that would otherwise would not be available.

Anonymous said...