Thursday, June 7, 2007

Selling Continues

The selling is continuing today, and has been pretty steady. Investors are finally taking into the account of rising inflation, and the possibility of interest rates being raised. With interest rates higher, it lowers liquidity. Liquidity is what has led to the large amounts of M&A activity that has caused this bull market to begin with. So decreased liquidity could spell the end of the billions of dollars in buyouts and takeovers.

Increased rates will also put more pressure on consumers, which is the other area in which I have concern. The credit bubble that already exists could be squeezed if rates climb.

I was really intrigued by the "full house sell" issue by Morgan Stanley's Teun Draaisma. The last time they issued this, it was April 2002, and has only been issued 5 times since 1980, with a subsequent drop in the market each time.

I'll continue to keep an eye out for new picks, but am pretty hesitant to buy into this market until we see stability.

4 comments:

Anonymous said...

Last time the guy from Morgan Stanley
issued a frantic "Full House" sell it
was April '02? If I remember right,
that was about the time the market
started up. Big brokerage house
analysts don't know what they are
talking about, for the most part,
sorry. He might be right, but he's
guessing.....

Michael said...

Thanks for the comment. Typically, I'm always a little skeptical on "full house" sell announcements and such. I think its a way for big brokerages to come back later and point out how right they were. In this case, however, the numbers speak for themselves. Take a look at this link.

http://ftalphaville.ft.com/blog/2007/06/06/5014/sell-sell-sell-from-morgan-stanley/

Anonymous said...

There was also the famous "Death of
Equities" cover on, what was it,
Business Week or Fortune....in '82.
Don't get me wrong, I hated to send
in my monthly mutual fund investment
last week (lower prices being good
for investors) and would like to see
some more of the 'irrational
exuberance' beaten out of the
market by next month, but who
knows? 30 years from now we'll all
know if he was right or wrong, and
probably you'll be all right if
you grit your teeth and send in
a set amount every month. No
money back guarantee, though, LoL.

Michael said...

I agree. The long term trend in the market is up, it has been proven. Smart investors hope for pullbacks so they can buy at more attractive prices. Trying to time the market can be very dangerous. As long as you've done your fundamental research, there is no problem sticking with your investments for the long term. Thanks for your comments!