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Goldata Financial
Dedicated to above average returns in the stock market.
STOCK MARKET COMMENTARY
November 16,
2009
From Elliot
Goldberg, Registered Investment Advisor, Goldata
Financial
Last week, the bulls declared victory over the fight for DOW 10,000 with the bears
retreating to defend 1,100 on the S&P 500. Strategy for the last few
weeks was to anticipate increased volatility with no net gain in position. Looking
back, results have produced increased volatility, but a definitive leaning to
the bullish side. A pullback next week would confirm the latter part of the
investment thesis and be productive from a performance point of view, but the
bullish action cannot be dismissed and must be planned for as more likely.
Should the S&P 500 breakout above 1,100, strategy should allow for
breakout performance. As such, I’ve moved stops to below the 50-day
moving average to allow for capturing outperformance on the upside, yet
providing more protection to portfolios than the standard 200-day moving
average would yield. There is a natural calm that has taken over the markets
in the last few weeks as it has moved higher --- a sort of “all clear”
that is exemplified by the debate over what to do with the TARP funds that
have either been paid back or not used. The consensus is that we’re
past the crisis and “it’s clear sailing”
from here so how do we divvy up this pot of manna. I’m not convinced we
are past this crisis (think refi commercial debt,
residential foreclosures) with government liquidity masking the pain much as Motrin
(better yet, steroids) would for arthritis. Personal credit is continuing to
contract (in fact accelerating), banks continue to avoid serious lending to
businesses and there is still no plan for creating a proper environment for job
creation (Obama did announce a “jobs summit” for December –
stay tuned). These have been the engines of growth in the past and it’s
hard to fathom that “it’s different this time.” The note
from Washington-watching this week again proves the law of unintended
consequences. Bank of America is having a tough time getting a seasoned pro
to take over for Ken Lewis as top-notch (and top-paid) candidates decline due
to the requirement of ultimate approval of the pay czar. Conclusion:
Liquidity and momentum are facts of life, must be respected and can, in fact,
lead to substantial temporary gains (think Nasdaq
circa 1999). However, I am reminded of two eloquent quotes of Warren Buffet
that seem apropos in today’s market: (1) “Never confuse genius
with a bull market” and (2) “It’s only when the tide goes
out that you find out who is not wearing a bathing suit.” Game plan: Corrections
and bear markets have not yet been outlawed by this administration. I’ll
continue to ride this horse as long as liquidity allows but sell discipline
should allow portfolios to be healthier longer term, as it has in the past,
after the inevitable rain.
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