Monday, September 29, 2008

Quick Thoughts on The Latest Black Monday

  • When stocks require a $700 billion infusion in order to tread water - is the risk/reward of being long stocks really worth it?
  • Granted, there are a lot of quality stocks being thrown out like the proverbial baby with the bath water. If a rising tide lifts all boats, does it follow that a falling tide sinks them?
  • If the government is reaction this way with the stock market only off ~20%, what will it do if stocks fall 50%? Stocks are still quite expensive by historical standards - it could be a slippery slope downhill.
  • Remember, bull markets in stocks usually begin with P/E's in the single digits, after everyone has thrown in the towel on stocks. I still see everyone in the financial media trying to pick a bottom - not nearly enough desperation for my liking.
  • While they rarely ring a bell at the top or bottom, desperation in mainstream publications are often a good start. Remember this BusinessWeek cover from 1979?
  • It may not yet be a global recession, but global stock markets look like they are already pricing in a global recession. Stock market action usually precedes normal economic action by 6-9 months - by the time a recession hits the midway point, stocks have usually hit bottom.
  • I sure love commodities coming out of this global recession. I have a long buying list, and we already have some very cheap prices staring us in the face. Exhibit A: Cotton futures fell below 60 cents today.


spreadtrader said...

Yes, agree with you, but may be a wait to start shopping, coffee holding over 130.00 but will it hold?

SugarHigh said...

Agree, definitely could be a wait here. Are you a buyer if coffee holds 130?

spreadtrader said...

I think it will break 130, would like to buy in 110-120 range, Cotton may also test lower, good trade of yours on the Soy, and with record low carryover too!

SugarHigh said...

Thanks, only wish I had a little more conviction and had bought a full contract! The low carryover scared me too much though.

Would love to see coffee in that range - we could pyramid that baby all the way north of 200

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