July 4th, 2008

Dismal outlook for Blog Writers and Talking Heads

It’s actually pretty discouraging …. and not much fun trying to write a blog these days that people will find interesting and want to read. Investors are looking for “tips”, stocks that they can buy either for a quick profit or to ride out this market storm. But other than watching the progress of the market crashing (it’s what I call it while others are still merely calling it a “bear market”), there’s little to write about.

I confess, I’m a momentum trader. But when I look at the today’s landscape I find few stocks that qualify as “momentum stocks, stocks making new highs or stocks with positive strength relative to the market. Neither are there industries (other than oil & gas) that appear immune from market weakness.My Market Timing Indicator has been consistently signaling (with the exception of 2 days in May) a highly risky investment climate, one warranting high, if not all, cash positions.

I reflect back to a Cramer Mad Money show from sometime late last year when he touted the stock of manufacturers with significant international exposure (due to the declining value of the $US). On the list were such powerhouse stocks as IR (Ingersoll Rand), UTX United Technologies), BA (Boeing), CAT (Caterpillar), DE (Deere). At other times, there was mention of strong brand name companies with significant foreign-sourced revenue like KO (Coke) and PG (Proctor and Gamble).

It sounded believable enough. So have these stocks and others with similar characteristics actually been safe havens? Not quite. Since December 31, 2007, the S&P 500 has declined nearly 14% (and 19.31% since the peak on October 9, 2007) but CAT has been the only one able to avoid moving down with the rest of the market.

And looking at the charts of these stocks today, it appears that none are going to turn around tomorrow and recoup their year-to-date losses to start making a profit. And as I broaden the search in ever wider circles, there are few companies with sufficiently compelling charts.

And those poor guys, the talking heads. They have to go on-air convincingly answering the inane question, “So what are you buying these days?” Rather than saying, “Not much” or “I’m actually shorting the market or XYZ stock”, they come up with an equally inane answer: “We’re value investors and, if you’re willing to hold stocks for the long-run, there are some undervalued stocks to be averaged-down or bought for the first time.” Don’t believe them and don’t follow them.

I have a hard time with the notion of “bottoming” because, other than saying the obvious that the stock or market has hit its lowest point in recent history, it says nothing about 1) whether it will go lower in the future, 2) whether and how far it will go up in the future and 3) when will that higher point be reached.

Everyone, listen up, “bottoming” isn’t a level, it’s a process. Stop telling me whenever the market or stock increases 1.5-2.0% in a day that it may have bottomed. You’ve been saying that for nearly 6 months and we’re still heading down. Only tell me we’ve bottomed when: 1) 2 months have passed with now new lows and 2) a new 4-months high has been reached.

In the meanwhile, everyone take your mind off the rising gas prices and the falling stock prices and remember that it is the birthday of this nation.

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