Listening to Market Predictions: Do Not Get Caught Picking Your Bottom Written By: David Neubert 2008-10-27 10:52:11 The media is having a field day with the market decline. People who wouldn't normally be interested are watching CNBC or Bloomberg TV and reading the business section. If you are making predictions of Dow 2000 or Dow 1000 you will get on TV or quoted in the newspaper. Now there is also a big incentive to call the bottom of the market. The person who randomly picks the bottom will become famous but many who follow the predictions of bottom pickers will get nothing but losses. There is an old Wall Street saying that goes: "Don't pick your nose and don't pick bottoms."
Neubert Top 15 Positions for March Month End 2008 Written By: David Neubert 2008-04-06 18:34:06 This month's top 15 is full of financials and oil. I like to bottom fish, and this month it finally worked. My exposure to big bad oil is starting worry my wallet and my heart.
1. Lehman Brothers (LEH - $44.05): Now that more than three years have passed since I left Lehman Brothers I feel it is appropriate to disclose my position in the investment bank. I have to admit that this has not been a great quarter to own any investment bank, but I have a lot of confidence in Lehman management and think that they understand the risks inherent in liquidity that funding an investment bank requires. In other words, they are no Bear Stearns.
Neubert's Top 15 Positions for August 2008 Written By: David Neubert 2008-08-05 04:27:15 Photo: trekkyandy, Creative Commons, Flickr
I haven't done this since March so be forewarned that there are a lot of changes. My portfolio has been ravaged by the meltdown of the financial sector, with special emphasis on Lehman (LEH). I also spent time buying the XLF on the way down and even at the bottom. My cost puts me about even on that trade. Much of my losses (but not all) in the financial sector have be offset by Big Oil and consumer non-durables companies.
1. General Electric (GE - $29.07): I think people will look back on the current price of GE and kick themselves for not recognizing the bargain of a lifetime in this company with so much diversification and exporting power in the face of a weak dollar. My average cost is about 10% above the current price at $32 - so clearly my average basis isn't at the super bargain price.
I continue to buy overweight financials, especially the big ones like Citigroup (C), Bank of America (BAC), JP Morgan Chase (JPM), Morgan Stanley, Goldman Sachs (GS) and Lehman Brothers (LEH). I'm even short some puts on the Financials ETF (XLF). In the short term, financials have to go higher as hedge funds cover shorts and, more importantly, mutual fund managers buy to correct the underexposure to the financial sector. Most Fed easing cycles imply very good returns if you buy just as they begin. The exceptions? The last one. I'm hold financials for the short run but I'm going to lighten up on these as this rally progresses. Why? The recipe is in place for some stagflation.
Stagflation is a period of inflation and low or no growth in the economy. The last time this existed was back in the 1970's in Britain and the US.
