One of Those Market Days That Makes You Scratch Your Head

After seeing the headline "Wall Street Jumps on G20 Hope, Mark-to-Market Change; Dow Above 8,000" I have to step back and scratch my head for a minute. It seems like all the G20 nations can do is print money to fix the problem, and re-inflate the bubbles that have already occurred. Now, I am certainly not saying that the markets will be lower in 5 years than they are now--I don't know. It is unfortunate that we won't have any real idea what would have happened had we taken a more responsible course of action by letting things deflate for a bit and then let things naturally get back on track.

I also don't understand why there is such a freak out over Mark to Market accounting either... While I understand that it can be useful to repeal in order to give a 'good feeling' to investors and lenders--I am reminded of Charlie Munger:

"If you mix raisins with turds, they're still turds."

I would be willing to say that mixing securities that are overvalued on a balance sheet is mixing turds in with the other good raisins that a company has... Governmental issues aside, having a company's books be easier to understand isn't a bad thing. As value investors, shouldn't we be in favor of a company being more transparent with what their liquidation value might be? Why don't people take a look into the earnings statement to see how much of the earnings impairment was due to non-cash charges that may or may not be economically viable?

All things told, it seems like a bunch of stocks that have been on my value radar have become a lot more expensive (though, still seem to be good deals). Horsehead (ZINC), Sears (SHLD), K-Swiss (KSWS), and Soapstone Networks (SOAP) all seem to have done quite well in the past week(s). Present holdings like Steak n Shake (SNS) and ITEX (ITEX) have recently exploded in ways that I have been pleasantly shocked about (as far as how quickly they rose, not the fact that they closed some of the gap between price and full value).

For the sake of us buying more cheap securities, I hope that this rise in security prices is some form of a bull trap. I now feel less at ease when buying stocks than I did just a few months ago, when things were in a virtual free fall.

In a relatively unrelated matter, at the end of the month, I am gonna be in Indianapolis for the SNS annual meeting--if anyone is gonna be there, shoot me an email and we'll talk stocks.

Disclosure: Long SNS and ITEX.

Comments

[Conan the B...:]

Let's revise your quote a tad. Let me substitute Gold for raisins.

"Some form of a bull trap", it Is Not Some form of a Bull trap if you can't define it. Even making the attempt to pigeonhole what has occurred in the last month as Some kind of Bull trap is nonsense.

There is no loud "clang, clang, clang" tossing the Bear into the ditch. The moves have been worldwide. Bad News is being tossed into the ditch alongside the Bear. If you don't see the difference, you haven't seen multiple Bears being hacked around the world.

CTB

Apr 03 10:12 AM

[Jeffrey Moore:]

When I said the bull trap thing, I wasn't really talking about the fundamentals, or the reactions the markets have had... only prices of securities. I want them to go down so that I can buy more of them at a cheaper price (ZINC for example, has more than doubled).


On Apr 03 10:12 AM Conan the Barbarian wrote:

> Let's revise your quote a tad. Let me substitute Gold for raisins.
>
>
> "Some form of a bull trap", it Is Not Some form of a Bull trap if
> you can't define it. Even making the attempt to pigeonhole what has
> occurred in the last month as Some kind of Bull trap is nonsense.
>
>
> There is no loud "clang, clang, clang" tossing the Bear into the
> ditch. The moves have been worldwide. Bad News is being tossed into
> the ditch alongside the Bear. If you don't see the difference, you
> haven't seen multiple Bears being hacked around the world.
>
> CTB

Apr 03 10:48 AM

[HChang:]

In a market crash there are usually at least 3 to 5 bear rally and each time it usually ends lower than the previous low. We only have 2 bear rally so far in Nov and Jan. My view is we are heading for another low when 1Q and 2Q results are out. There is no driver that i can think of for a recovery. I will only start buying stocks in Q3 to Q4, a little at a time but monitoring for any drastic deterioration. When Wall Streets crash in 2001, it took 3 years for a sustainable rally to develop.

Apr 03 11:07 AM