Stock Market Roadmap for 2009
By William Fleckenstein Jan 07, 2009 10:45 am
Software, energy, infrastructure ones to watch.
But given the exceptionally complex financial landscape, I’m finding it hard to have a strong opinion about what the stock market roadmap will look like in 2009.
Conflict Clouds Market Outlook There are massive forces working against each other: Enormous fiscal and monetary stimulus, on the one hand; the undertow of the collapsed housing/credit bubble, on the other. Were it not for the imagination of Paulson and Bernanke, the financial system would have been vaporized.
In any case, the fear of what that undertow will lead to, combined with the damage that’s already been done, is spurring the creation of ever-larger government stimulus packages as these 2 forces continue to thrash it out.
My opinion: At some point, it will be clear which force has the upper hand, and we can then decide whether (and how aggressively) to be long or short. But at this juncture, it's difficult to ferret out how and when those opportunities will set themselves up. This is one of those moments where it may really pay to be more liquid and flexible. I prefer to react more and predict less this year - at least until the roadmap becomes clearer.
Don’t Scorn the Bridge-and-Tunnel Crowd
On the long side (other than precious-metal names), I would say the names to focus on would be the obvious infrastructure companies. (I'm sure folks can come up with their own list. I myself don't have a solid one yet.) I also happen to think the energy patch may be a worthwhile place to research.
Software names also make some sense. I recently mentioned Microsoft (MSFT) and Adobe (ADBE). In his current newsletter, Fred Hickey says that, in addition to Microsoft and Adobe, he owns EMC (EMC), Sybase (SY), Lawson (LWSN), Novell (NOVL), and Cadence Design (CDNS) - the latter 3 being sort of down-and-out and cheap stocks, though with visible prospects of recovery. The others are well-positioned, reasonably-priced, liquid names.
One place I have absolutely no interest in going long would be hardware tech. Yes, they'll bounce, but I think that sector will be a far better place to look for shorts. The financial arena, with the probable exception of the banks, will also be an interesting place to nose around for shorts. But I would rather see how the rally plays out before I set my short list.
On the long side, I think it pays to look ahead and investigate the names you might want to actually own once the prospect of a real recovery exists. I'd focus on those names for whatever trading rallies I'd feel confident in capturing.
I hope all of this is useful food for thought. I'll sum up with these watchwords: Be patient, and be flexible.
No positions in stocks mentioned.
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Reply
2009-01-07 11:05:00
Hey Bill!
Here is a good natured rib for you.
I remember back in the day (1997-1999) you coming on CNBC and having Bull Bear debates with Joe Batt. Obvously...those 3+ years you had a good point...stocks were getting demonstrably mispriced to the upside.
But...(there is always a but)...
Your timing was way way off. The Bulls carried the day for the 3+ years.
I can't help but wonder if your recent closing of your Short Only fund is a sign that we can expect a solid bottom in stocks - in about 3 to 4 years.
:)
C'mon! SMILE!!
I remember back in the day (1997-1999) you coming on CNBC and having Bull Bear debates with Joe Batt. Obvously...those 3+ years you had a good point...stocks were getting demonstrably mispriced to the upside.
But...(there is always a but)...
Your timing was way way off. The Bulls carried the day for the 3+ years.
I can't help but wonder if your recent closing of your Short Only fund is a sign that we can expect a solid bottom in stocks - in about 3 to 4 years.
:)
C'mon! SMILE!!
2009-01-07 11:16:20
Strong opinions or otherwise...
...yours were the first disparaging words I stumbled across (MSN.com) back in late '06, leading me to Minyanville (and Todd, Kevin & Co.) in '07. Words cannot adequately express my deepest gratitude. Really.
Things are, it seems, much murkier now than then, though it remains to be seen if things are actually better. Time will tell.
Do not be a stranger here! Your observations, however understandably uncertain in this psychotic market, are most welcome.
Things are, it seems, much murkier now than then, though it remains to be seen if things are actually better. Time will tell.
Do not be a stranger here! Your observations, however understandably uncertain in this psychotic market, are most welcome.
2009-01-07 12:18:22
Roadmaps assume there are roads, we need a good topographical map!
Mr. Fleckenstein,
It seems trying to forsee what segments can carry the day at this early point in this year, or perhaps in this downturn in general is almost impossible.
While the trends for recessions follow general characteristics, this one has removed all the underlying supports that eventually provide a basement. The look from a macro view is similar, but the micro view, there's the rub!
Everyone I know either is strapped for cash, or certainly feels like it.
As a smalltime homebuilder (eeek, nice 2nd career) I see the legitimate contractors and tradesmen losing everything (The ones who helped create this mess operating illegally with practices and people deserve this wrath) The moderate size suppliers are folding like accordions.
The options for the people becoming unemployed into new work fields are pretty limited, and if they find them they find they get less.
Even worse, the answer to every employers problem is to get more work for less, because there is less coming in! We are at the beginning of a violent whirlpool of descent.
The credit markets that provided the bathtup stopper is history and what little credit there is at the micro level will be further removed in the self preservation of financial institutions.
What roads there were are being ripped up by forces so large no one is sure how to stop the carnage. What impact TARP and any other stimulus may have will be just a bandaid.
Tax cuts, while helpful to large industries, don't do too much for small organizations, except extend the amount of time you can bleed cash...since there is no demand or no method to finance demand for most products.
When looking at the number of people being disrupted by this economic event, the masses of Americans that have lost jobs, income, the ones that had some investments between markets and their homes is staggering. These people will not heal quickly, they are not even done getting hurt yet.
The public demand for goods and services is in a significant decline, while occassionally healthy for the economy, this time demand will not come back for an extended period because it cannot.
Dollar Store/Family Dollar as the best stocks of 2008, wow, how far we've fallen..what is even scarier is how much further we'll fall.
Even after the hedgies are done with their redemptions, think of the investment dollars which will be removed when 401Ks can be liquidated with minimum penalty.
Its gonna be a new world order alright, where was that road. Oh well just give me the topographical and I'll look for a place to build lean tos for us all near a nice big lake. Pass the fire cooked squirrel please.
Preservation is king!
It seems trying to forsee what segments can carry the day at this early point in this year, or perhaps in this downturn in general is almost impossible.
While the trends for recessions follow general characteristics, this one has removed all the underlying supports that eventually provide a basement. The look from a macro view is similar, but the micro view, there's the rub!
Everyone I know either is strapped for cash, or certainly feels like it.
As a smalltime homebuilder (eeek, nice 2nd career) I see the legitimate contractors and tradesmen losing everything (The ones who helped create this mess operating illegally with practices and people deserve this wrath) The moderate size suppliers are folding like accordions.
The options for the people becoming unemployed into new work fields are pretty limited, and if they find them they find they get less.
Even worse, the answer to every employers problem is to get more work for less, because there is less coming in! We are at the beginning of a violent whirlpool of descent.
The credit markets that provided the bathtup stopper is history and what little credit there is at the micro level will be further removed in the self preservation of financial institutions.
What roads there were are being ripped up by forces so large no one is sure how to stop the carnage. What impact TARP and any other stimulus may have will be just a bandaid.
Tax cuts, while helpful to large industries, don't do too much for small organizations, except extend the amount of time you can bleed cash...since there is no demand or no method to finance demand for most products.
When looking at the number of people being disrupted by this economic event, the masses of Americans that have lost jobs, income, the ones that had some investments between markets and their homes is staggering. These people will not heal quickly, they are not even done getting hurt yet.
The public demand for goods and services is in a significant decline, while occassionally healthy for the economy, this time demand will not come back for an extended period because it cannot.
Dollar Store/Family Dollar as the best stocks of 2008, wow, how far we've fallen..what is even scarier is how much further we'll fall.
Even after the hedgies are done with their redemptions, think of the investment dollars which will be removed when 401Ks can be liquidated with minimum penalty.
Its gonna be a new world order alright, where was that road. Oh well just give me the topographical and I'll look for a place to build lean tos for us all near a nice big lake. Pass the fire cooked squirrel please.
Preservation is king!
2009-11-23 20:29:05
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