Nothing's Changed Fundamentally -- But Since When Does That Matter?

by: Roger Nusbaum

roger nusbaumRoger Nusbaum submits: "Nothing Has Changed Fundamentally"

If we had played a drinking game with that phrase, I would have been passed out an hour into the trading day on Thursday.

Newhart 04 03 2007There are a couple of one-liners that make for appropriate responses, like maybe 'the fundies haven't changed but the market's perceptions of them has changed' or 'what we thought about the fundies before was wrong.'

Depending on how this week's events shake out, the market might be telling us something has changed. Further, the statement that nothing has changed overlooks the fact that the fundamentals rarely drive the bus in the short run.

What is your favorite stock in your portfolio? Is it down this week? Is it related to China or the carry trade?

I don't know that I have a favorite stock, but plenty of names (probably all?) in the portfolio that have nothing to do with China or the carry trade are down on the week. Great fundamentals have meant nothing this week. Of course one week means nothing to your long term financial well being either.

More importantly, if something major were changing do you think that all the people they round up to interview would see it ahead of time?

I dug up this chart yesterday but never got around to posting it. It shows strength and weakness of the NZ dollar and the Hungarian forint both against the yen.

Both are beneficiaries of the carry trade. Both exhibited huge moves up before each getting pasted in the last few days.

The chart shows that some folks who put the carry trade on in hopes of 7% (annually) a few days ago are now under water after the currency moved 4% against them in a week.

HUF vs JPY 04 03 2007