Wednesday, October 15, 2008

Commentary & Community Chat

Commentary & Community Chat

By Bill Cara | 15 October 2008

The airwaves are now full of chatter. Everybody in the media, it seems, has a position on the economy and direction of the market. That’s good, but how much of it makes sense is a different matter. Let me just say that the most devious schemes in the history of the world share common elements with those most noble. One thing I know is that most of the sales talk— pro or con, honest or deceitful— has an element of truth, which pushes and pulls the owners and managers of capital such that extreme volatility is the result. What you all need then is a sniffer that filters out the nonsense and, whether contrived or random, the noise of the market.

The deeper you stick your nose into it, the more you will smell some good, some bad. You will need to have full control of your senses to help you work though to the conclusions that will help you make decisions that prove to be successful in the time frames that are important to you. However, the nonsense and noise out there is what I know holds you back. My point today is that you need to calm down in a world gone crazy. Tough maybe— but you can do it.

I have turned bullish, generally, but this community also recognizes my [ongoing] concerns and cautious approach. I have warned that the consumer sector [all parts] will continue to suffer from the "no tickee" syndrome. That’s what happens when job layoffs and credit withdrawals and underwater mortgages become primary issues in the lives of tens of millions of people who recently were being told, "… you are richer than you think". Until the people start to look ahead to the day when they will come home with tickee, traders have to avoid the consumer sectors.

No tickee means no new car, washing machine, wardrobe, computer or vacation in Bahamas. It means too many people need social services like food banks to help them make it through the week, wondering how they’ll make it next week. Banks will not be much help to the people at this point, because they are already working overtime merely to collect payments on existing loans so they won’t have to then try to collect the assets that were put up as security for those loans. Until this crisis passes, it’s also not a good time to be investing in the banks. Not yet at least, but trillions of dollars, euros, pounds, yen, and yuan being transferred from government to banks makes sense, looking forward.

The headlines today ring out "Global recession fears". But, yes, I am bullish, overall. Unabashedly so.

Prices have fallen to a point where long-term values are all over the board. I looked at a debt-free company last night that has much more than twice the cash per share in its treasury than the last price of its stock on the market. What’s wrong with that picture other than we’re at the transition from Bear to Bull, and the Bear has taken that stock down -90% from its 52-week high.

I see lots of that kind of thing. I always do at the end of Bear markets. It’s also a time I hear that business will never recover; that the economy will fall deeper into a massive recession, yada, yada.

Yes, times are tough, and will be tough for a while yet, but there are good values on the market, and smart traders are snapping them up. Do you recall a couple years ago that I opined here that the market would be close to the cycle bottom when Warren Buffett started to invest the mega-billions of the cash at Berkshire-Hathaway? This value seeker has recently invested mega billions.

Most, but not all, the values in the market today are in the energy, basic materials, industrials and technology sectors. BUT, we need to avoid the companies in these sectors that have high debt and those that rely on high consumer turnover to meet their debt service.

If you happen to like financial services, and would look at a Canadian company that one of my colleagues likes a lot, have a look at Home Capital Group Inc (HCG.TO C$26.45) on the Toronto Exchange. This is a financial services company that is prudently managed through thick and thin. There are many fundamentally sound companies like this in Canada and the US. You just need to do your "home" work to find them.

Tough times ahead, yes! But there is relief on the way from governments around the world, the likes of which the world has never seen in its history. There is also going to be regulation that will turn the present system on its head. Finally, the reflation policies of governments today will mitigate the damage done by Humungous Bank & Broker and will lead to economic recovery tomorrow. [[Eventually; some time next year, probably. But first we have to salve over tens and even hundreds of trillions of dollars of derivatives fast 'evaporating' from the system with CB infusions that MERELY amount to $trillions!: normxxx]]

I no longer see the glass as half empty. I did that when going through the market topping process one and two years ago. Now that prices have plummeted, and great values abound, I see the glass half full.

You too need to consider the possibility. Have a good day.



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The content of any message or post by normxxx anywhere on this site is not to be construed as constituting market or investment advice. Such is intended for educational purposes only. Individuals should always consult with their own advisors for specific investment advice.

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