The current market is brutal and I think some of the selling is getting overdone. Almost all stocks, except speculative oil stocks, have been sold off indiscriminately. I think the indiscriminant selling provides opportunity for those who are willing to think like contrarians and exercise patience.
I think the sell-off in small caps and tech stocks has been undeserved. Some of my stock recommendations have taken a hit but I think it would by unwise to follow the herd and sell anything regardless of valuation, especially stocks that have improving fundamentals.
I think the market will probably continue to go down some more but I think it would be wise to start to accumulate small caps and tech stocks. I would avoid/short financials and airlines.
On another note oil continues to rise and nothing is being done to counter the excessive speculation taking place. The Fed, which is causing more problems than it is solving, needs to learn moderation and start being proactive instead of being reactive. In the aftermath of the housing bubble, which the Fed helped create, the Fed decided to drastically cut rates without regard to rising commodity prices. This has helped create the current commodity bubble. Now the Fed is just sitting there without a clue. (more…)
Great Calls on Oil
I have written quite a few articles about the speculation in oil over the last few months and I want to revisit some of those articles because I have been proven correct.
First, there can no longer be a debate about whether the excessive rise in oil futures was due to speculation or supply and demand fundamentals. It was obviously due to speculation. In fact, the last thing oil was trading on during its run was supply and demand.
Oil was trading based on the falling dollar, potential supply disruptions in Nigeria and Iran, and self-serving bullish calls (actually flat our pumping) from Morgan Stanley and Goldman Sachs (their hedge funds were long oil). When oil was making its run towards $150 traders were completely ignoring supply and demand fundamentals because demand destruction had been evident for a few months. (more…)
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