Friday, February 20, 2009

Equity markets

At this point it seems that all old adages about the equity markets are not working.

There is no investment now in a traditional sense. The belief that equity markets had "priced in" bad news is not working. When a company reports a bad quarter that is universally expected, the stock gets whalloped. What that seems to say is that the only investing going on is on the short side, which from this perspective is not investing. It is betting, and the reverse side of the momentum investing mantra that ruled, with respites, for the last fifteen years.

There are still indications that real investors are seeking bargains. The best companies with growth prospects and dividends in healthcare, energy, and basic consumer needs are still seeing buyers. The broad market, however, is a wasteland. Financials, in particular, have no ballast whatsoever. Every attempt at stabilization is met with another confidence smasher. Stanford, UBS, complete unknowability about the government's mortgage plan and how devastating it will be to the securitization markets, all of this continues to play into the hands of those betting on negative outcomes.

In late September I was in the northeast corner of Washington Square Park watching Loose Marbles. A family member's digital camera was befuddling me and I asked a young soul patched man with his daughter how to work it. We chatted and exchanged backgrounds, and he commented on the bargains in the equity markets at that time. My non-advice was existentialist. "Today's price represents the only value that you can rely on." I hope that he listened, and while I sold some and added to some of the best around the edges, I wish that I had done more to heed my own advice. These are startling times.

Good companies are still good companies, doing things that the world needs. The issue now is quickly becoming whether the strife that we are experiencing evolves into political and social events that are beyond stock market gyrations.

Still sticking it out here, but concerned about the big issues......what can be said.....the idea of bargains is non-existent at the moment.


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