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« How to Win a Recession-Predicting Contest | Main | The Psychology of Risk »

April 03, 2008



Wayne - I have tried to show several approaches that often give quite different results. Right now, they happen to line up. I know that many, like you, are waiting for stocks to get cheap. I wonder how you will know?

BTW, Oracle did not guide lower. The guidance was "in-line" but some were spooked by a company statement saying that some deals had drifted out of the quarter at the end of the month.

To me, this shows a market that is willing to pounce on the slightest sign of confirmatory evidence for the negativity. Everyone sees the stock go down. Those who do not own it draw their inference from the stock movement, not from the actual conference call. The stock has rebounded from the slight revenue miss, almost to the pre-call price. (I am paying attention since I own the stock, as do my clients).

I am quite sure that your worry about the Fed being out of ammo is very widespread, and I appreciate that you took the time to comment. I'll check out your blog to get more of your viewpoint.

Meanwhile, as to the ammo, let's give what has already been fired a chance to have an effect!


Wayne Mulligan

This is a tough one...calling a bottom or saying that all of the possible negative outcomes of the current economic/credit debacle we're in have already been priced into equities is a tough pull to swallow. At the end of the day we haven't seen the complete fall out from the credit crunch yet, more homes are going to be foreclosed on and eventually the Fed is going to run out of "rate cut ammo". Hopefully things will pick up on a business front before then but let's look at the facts. Market leaders (finance and tech) have both indicated that this year is going to be rough - Oracle and Cisco (two of the largest technology companies - one in software the other in hardware) have both guided downward this year.

And when B2B companies are getting hurt, it's not long before consumer facing companies start to feel the same heat.

I appreciate the fundamental/technical model you're using and it seems sound. But with some much uncertainty in the future I'd be loathe to make any big macro predictions right now.

I think we can both agree, however, that on a strict valuation basis, there are going to be some cheap stocks laying on the street this year. That's when I want to be around with a fist full of cash and ready to buy stocks like it's 2002 again!


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