Friday, April 13, 2007

Market Close: 04.13.07


I know that anecdotal information is passingly worthless--but like good gossip, far be it for me to let that stop me.

Local carpet contractor says that business is slower than he's ever seen it (he's been in the business for many, many years). Neighbor who works in transportation--no body is shipping anything.

So, from my small corner of the world some passing tidbits.

Today's market strength is a bit of a surprise. It is worrisome that energy stocks and gold are so strong. Partly due to a weak dollar and partly due to inflation worries.

10 comments:

Anonymous said...

We are clearly in to Stupid Time here. We are apparently projecting the Bernake Put and benign results as far as the eye can see. That's the formula for bubbles. This type of trading was last seen in late 1999 early 2000. I am about as disgusted as I can get. A lot of people are going to get hurt by this recklessness.

MarkM

russell120 said...

There is not a great historical correlation between economic strength and stock prices. The inflation number is IMO the more worrisome one.

Anonymous said...

r120-

That is true. Low inflation and high margins *explain* high multiples, not that the buy and hold investor is comforted by that.At 17.5 times record earnings and record margins they can expect about 1% real over the next 7 years.

Here we have rising inflation and constricting earnings. That is not usually a formula for a PE expansion spree.

I didn't think one genearation was stupid enough to construct serial stock bubbles but that is what the trading feels like to me.

(Long and enjoyong it while I can.)

MarkM

Gemma Star said...

As inflation kicks up, it may be a good idea to own BID (Southeby's). Collectibles, art, etc. will begin to move; auction houses will benefit.

I bought and (foolishly) sold BID a year ago. My bad.

It's at a high. I'm watching for a pullback and (per what I've learned from Bill C) a lower RSI number.

Leisa said...

I think that the stocks is getting a little goosed here. Soon we'll be in the "worst 6 months"--I take that phrase with a dash (as opposed to a grain) of salt.

Re collectibles: I think that collectibles will go the way of stocks. My sense is that collectibles are up because there is so much money floating around. I don't see them as an inflation hedge. However, now that I think about it, if the USD goes south, then those collectibles may seem awfully cheap to wealthy Asians and Europeans. Hmmm.....

Cramer was warning of the Chinese raising interest rates. We are screwing around with trade policies and they are going to tell us to go ...well you know to ourselves.

Mark, it does feel like stupid hour. I think that the VIX will be our barometer to exit--when it gets low again, then sayonara.

My energy stocks are doing very well. It is nice to see some green. Though, my SRS turned red today.

Gemma Star said...

Art, Leisa, art.

There will be money chasing art. (I used the broader term "collectibles".)

Think back to the last U.S. inflationary orgy. Remember the huge prices foreigners (Japanese in particular but others too) were then paying for art? Some prices were record-breaking.

My idea about owning BID is the same as owning the companies that sell mutual funds instead of the companies' funds. For many years owners of fund company shares did better than buyers of the companies' mutual fund offerings.

But we'll watch. Maybe I'm wrong.

Hope I'm wrong about inflation. (Don't think so though.)

russell120 said...

Per Lars Tvede's book "Business Cycles"

Art (Collectibles really) perform well when global High Net Wealth Individual (HNWI) wealth grows.

This tends to occur in times of falling interest rates and at least reasonable economic growth

Collectibles are prone to speculative fever.

Collectibles have a high correlation with property prices, partly because they are the main determinants of HNWI growth.

They have a low correlation with equities, but may lag them at turning points.

They over perform fixed interest rates over the very long term

They under perform equities over the very long term

Mid- and lower- priced segments are most sensitive to business cycles.

He notes a study form 1995, Oliver Chanel's "Is art Market Behavior Predictable?" that found that art prices in England, Japan, and America tended to lag equities prices by one to four quarters. But then they did very well during the equity market meltdown of 2000-2002 showing that the HNWI connection was more important. HNWI's did pretty well (note high property prices) in 2000-2002.

IMO art is a very tricky prospect now. This current cycle is timing very close to the end of the 18-1/2 year property cycle. HNWI wealth would be hammered by a big property wealth drop. To the extent that cycles do play out to form, art is a very risky investment now. On the plus side if you had a lot invested in that areas, it appears that you would get some warning time.

My art collection consists of some nice works from local artists, a few gifted items from older family members, and my little one's (age 3-1/2) highly entertaining productions.

GemmaStar said...

Thanks for that information, Russell 120. Quite useful.

Leisa said...

I think that Russell can be our blog fact checker! He always comes up with this erudite stuff that just blows me away.

Gemma Star said...

I second the motion.

Carried!

Russell: you're on.