Monday, January 7, 2008

Off The Deep End

excerpts from this week's report:

"Many investors and nearly all in the media have become Roubinized: seeing the glass half empty, filled with dirt and mud, and leaking out the bottom.

The herd on the street mentality starting 2008 contain the same characteristics as it did at the start of 2007 – only in reverse. One year ago all the talk was about a never-ending Goldilocks scenario. Kudlow was in his glory and largely ignored were..."

"To be clear, there is a huge difference between those who expressed concern over the lack of transparency in the credit derivative mess and the off-the-deep-end club..."

"In 2007, I was early in my concerns re the credit fiasco. Maybe I am early again in my skepticism re the consensus thinking for 2008. For example, at last Thursday’s NYSSA Market Forecast luncheon, all three equity strategists expressed the view that..."

Investment Strategy Implications

"The fear factor today is beyond palpable as early 2008 appears to be the flip side of early 2007 - too much complacency, only this time to the downside.

Perhaps I will once again be early. Perhaps 2008 will follow the consensus course for a while. However, in a market that is quite undervalued (see Expected Return Valuation Model in report) and one that has not triggered the full complement of negative technical signals that a bear market produces (see Moving Averages Scorecard in report), the off-the-deep-end club is likely to be just as wrong this year as the Goldilocks club was last.

Advisable course of action: Take a breath, take a pill (if need be), drink some chamomile tea, meditate, enjoy a sunset, smell the roses, diversify away from weak US sectors (tied to the US consumer), wait for a major buying point in Financials (yep, you read it correctly), and always be on the lookout for Lunch Money trades,.."

also in this week's report:

* Expected Return Valuation Model
* Moving Averages Scorecard
* Model Growth Portfolio
* Sectors and Styles Market Monitor
* Key US Economic Indicators

To gain access to this week's report (and all reports), click on the subscription info link to your left.

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