market thoughts

Fun days in the market huh? ouch. Good news is that the portfolio outperformed today by about 40bps -- bad news is that I still lost over 2% of my money today.



People are looking for an intermeeting fed funds cut but does it really matter other than for confidence whether the cut comes today or at the regular meeting in 2 weeks? How can you argue it matters when fed rate cuts have an 18 month lag to their full impact? This is the problem the fed forgets -- the last rate increase is still impacting the economy, while the first few rate cuts have only had a minimal impact so far.


Remember the rule -- rate cuts can't save whatever part of the economy that is in trouble but it can help other parts. So what does that mean? financials are going to suck for some time and the lack of credit availability will likely impact consumer spending (see retail and restaurant results). But tech spending might hold up better than other areas -- say the need for network capacity or new consumer gadgets, etc. IBM has great results as an anecdote for this thought.


But Intel lowered Q1 guidance for revenues, which is not good and runs against this theory.

Flir won a $17 mill defense order -- this is a good time to have the US Government cover half your revenues.

A few days ago I discussed the whole depression question and argued folks were getting too bearish. Still think that even after today -- the issues are being dealt with. That's what the bears never count on -- they assume there is nothing positive that can occur and then B of A buys countrywide and Citi and Merrill raise billions in new equity from foreign investors. Did citi hold back on some of their losses? probably but its not like all the tech issues came out at once in 2000/2001 either. There are ripple effects -- in 2000 first the dot coms busted in march 2000 and then the telecom services companies couldn't borrow anymore money and then the telecom equipment stocks missed and then the storage stocks missed -- in mid 2001. Somewhere after that Enron collapsed. So earlier this year a hedge fund blows up and then the subprime moves to the rest of the mortgage market. First liquidity was the issue and now we realize its solvency is the real issue -- which financial institutions are solvent and which are technically insolvent or bankrupt.

I believe financial stocks have further to fall before the ultimate bottom but that doesn't mean we can't take a break for awhile. Nothing declines in a straight line. This is why I'm waiting on the Moody's -- figure there is a good chance I'll be able to buy some in the 20's later this year.