Saturday, February 02, 2008

Back on track?

Lifting off at JFK on Thursday morning the 24th for a hastily arranged but necessary trip to Peru due to a family situation, I was of course unaware that my departure would be coincident with the beginning of the recent market recovery. Should it be a matter of concern now that I have returned?

The modest but welcome improvement may be the beginning of a trend, but it is certainly fragile enough to be vulnerable to any bad news. Looking at the stocks followed here, the most distinct rebounds have been in small cap and mid cap value stocks that had been clobbered over the last three months. Their lack of visibility and lower liquidity compared to the large caps, combined with the gains that investors could take in the event of their own lack of liquidity, seems to have made them sitting ducks for the downturn even if they had strong balance sheets and no involvement whatsoever in the subprime issues. They had room to pop, at least for now. Some financials that have been soundly run but had been painted with the subprime brush nevertheless have come back to life in a significant way as well. International stocks too have begun to rebound but they have some distance to go to pick up the run they had experienced over the last three years. In the aggregate tech stocks improved as well but it seems that sector and company specific gains pulled the averages up rather than a total group move.

It's all nice to see, but I'm back.

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