Hedged In

Grantham: Overvalued Markets Due for an Adjustment

Why didn't you link to the full article by Jeremy Grantham? It's here (in PDF):
www.gmo.com/websitecon...

Why Interest Rates Will Go Up

There's no evidence that inflation will take off in the short term given the weakness of the economy. It looks instead that the trigger for higher interest rates will be a collapse in the dollar (which in any case will lead to higher inflation anyway).

Stocks and Sectors That Could Catch Swine Flu Symptoms

On Treasuries -- it's interesting that the consensus is that they're a short. News like this could cause a rush of short covering.

Swineflu is probably good for video-conferencing -- long trade on Polycom (PLCM) for 4-6 months?

How Stock Market Indices Underperform

The Dow is unrepresentative of indexing in general, because it's so narrow (only 30 stocks), and due to the annual changes is more like an actively managed fund.

If you use a total market index from Vanguard (VXF), iShares (IYY) or StateStreet (TMW), you avoid those problems.

Wall Street Breakfast: Must-Know News

"The U.S. government and the Federal Reserve have spent, lent or committed $12.8T to rescue and stimulus attempts so far. That's 14 times the $900-odd billion in circulation; almost equal to the entire 2008 U.S. GDP; and works out to $42,105 for every man, woman and child in America."

Perhaps it would have been better to give $42,105 to every man, woman and child in America.

Wall Street Breakfast: Must-Know News

On the Fed announcement, Kirk Shinkle has a good article analyzing it and questioning whether the stock market rally is sustainable:
seekingalpha.com/artic...

2008: Ten Unforgettable Days

Ricard, interesting point. Thank you.

Tech only under-performed the S&P 500 by a few percentage points over the last 12 months (finance.yahoo.com/q/bc...). While it's intuitively clear that capex gets cut in a weak economy and tech is highly leveraged to capex budgets, I wonder if there's any hard data to support the claim that tech profits are unusually leveraged to the economy.

My sense is that most of these stories weren't truly impactful, even if the economy had been stronger.

On Jan 05 02:01 AM Ricard wrote:

> Tech suffers from any market downturn because they tend to be a "derivative
> industry" - when markets are good, companies invest in tech, and
> tech makes outsized profits during this time.
>
> When times are not good, tech is the first to get cut, usually resulting
> in a swift, jolting decline in tech equities. This has played true
> this year. All of these stories you cite rely on good markets -
> when markets are bad, all the chips suddenly disappear from the table.
> That explains your lack of correlation.

2008: Ten Unforgettable Days

It's fascinating to compare this list to TechMeme's "Top 10 objectively biggest tech stories of 2008" (news.techmeme.com/0812...). They were:

1. Microsoft Proposes Acquisition of Yahoo! for $31 per Share
2. Apple Announces Its Last Year at Macworld
3. Google Chrome, Google's Browser Project
4. To Our Developers (from Apple)
5. Google Is Taking Questions (Spoken, via iPhone)
6. Google to buy Valve (turned out to be incorrect)
7. Music Industry to Abandon Mass Suits
8. Google, Microsoft Said To Be Preparing Bids For Digg
9. Introducing Windows 7
10. iPhone 3G Launch Date Confirmed

The remarkable thing about the TechMeme list is how little impact most of those stories had on the overall stock market or the price of individual securities. The exceptions were the Microsoft bid for Yahoo, and rumors of Steve Jobs' declining health, perhaps behind Apple's decision to end Macworld.

This highlights the fact that tech was almost irrelevant to the overall market this year. The key market drivers, as we know, were the credit crunch, the implosion of the banks, the continued decline in the housing market, the bailout and the end of the commodities boom.

But perhaps the lack of stock market impact of 8 of the 10 top TechMeme stories also suggests that those stories weren't objectively important at all, because the stock market put no discernible value on the news. Which suggests that the attention given to many tech news stories and the blogs that cover them is perhaps exaggerated.

2008: Ten Unforgettable Days

This is a useful record of what happened on those days, and the tone of the market. Congratulations to the SA editors on a fantastic job, and happy 2009!

U.S. Household Sector Not as Bad Off as Commonly Believed

Excellent article -- carefully argued, good data.

Wall Street Breakfast: Must-Know News

This is the best financial news summary available -- including the broker morning briefs.

John Hussman: Value Dinosaurs

This quote was also worth noting: "While stocks are now clearly undervalued, there is a reasonable chance that we will observe a retest of recent lows, or even lower lows, most probably early next year. Still, it's also possible that we have seen the lows, and that stocks might move substantially higher in the months ahead. The market is a discovery process, and information develops slowly."

First Glimmers of Optimism

The market is rebounding big time this morning because it's strongly over-sold, having fallen sharply in an amazingly short time.

But where it will be three months from now, particularly after a week holiday sales season? I'd be interested to hear people's predictions and reasoning.

So Much for the Bailout

I totally disagree -- I didn't know about CDARS, and that alone made this article worthwhile.

Thank you Felix!

Today's Bear Market: Fundamentals Crumble Beneath Prices

Paul & Shark -- I like your comments, but they'd be much easier to read if you left a space after each comma. Space bar not working?