Friday, August 28, 2009

Late? Early? Missive

I don't normally write posts at 12:51 a.m. I'm normally in winkie land. Today (err, yesterday!) was my husband's birthday. For whatever reason I was both uncomfortable and wakeful, and I elected to come downstairs.

I'm still finding myself at a strange crossroads. On Wednesday, I had the most wonderful day away from client and market demands. I went with my two friends from my KPMG days (friends of 27 years) to the Barboursville Winery's lovely restaurant, Palladio. They feature Northern Italian cuisine. As I was not the designated driver, I had a 4 course lunch with wine pairing. I generally do not drink in the middle of the day, and I was sorely wanting for both a binkie and a blankie for the ride home.

While drinking, eating and laughing-'til-you-cry, a combination with this threesome, are a wonderful curative, I've not come back to the markets with any sense of feeling grounded. No doubt you are bombarded with opinions--many of them confounding--about what the market will or won't do and why.

But when there is no new thinking to be had, sometimes it is useful to revisit old thinking or go to others and read and think a bit. So my point of this post, is to give you a few things to read together.

First, I wanted to revisit what I summarized from Napier's book. You can find that post here. Second, I always find Jeff Saut to be wonderfully grounding. Do look at this column,

“It takes a licking and keeps on ticking?!”

from this week. (Click on the above).

Financial Sense online has two articles from this week. The one that REALLY GAVE ME PAUSE was Frank Barbera's. If you were to read nothing else, read this:

The Wall Street-Main Street Paradox

You might guess on what gave me pause (but it is late/early depending on your perspective, so there is no point in being coy about it or make you thrash about in your guessing) was this: This rally is so unbelieved in, and so many are coming into the Sept/Oct season with fear, then it would be as perfectly reasonable to NOT expect a decline in this time as it would have been to NOT expect the "sell in May" aphorism to be worthless. I may my negatives wrong and I may have to clarify this post later. And I'm still big believer that we will get a rock'em sock'em downturn from these levels.

Here's my theory: We did get many positive (less-bad varietal) surprises out of earnings. Companies have cut hard. We have to see follow through on revenues rising. So there is a bet of betting on the come that sales revenues will rise and all of this manna will drop beneficently to the bottom line enriching stockholders. I offer that we will NOT see this to be unequivocably the case until the next two quarters. It MIGHT happen with Q3, but I think that there will be so much ambiguity regarding Fed stimulus not percolating through etc. Remember this view is based on the market-as-teenage-boy model will come into play. The market needs a few whacks on the side of the head before the rose colored glasses goe flying. So Frank's view has some real merit.

And finally, Danielle Park's missive gives an interesting perspective

Speculating on Recovery

With respect to Parks, she, like many, note/lament on the lack of volume on this rally. To my eye, and I'm not sure why other commentators (real ones!) do not note this simple fact: the volume on this rally is heavier than the volume leading up to the decline last summer. If you have an answer for that or if you think my eye is jaundiced, you may write me and tell me that politely.

Hopefully there was something of use here. Now I will re-retire!