Musing on the Markets : Hillary Clinton

9 ½ Weeks

Vinny Catalano, CFA — Tue, 12 May 2009 18:31:00 GMT

Time flies when you’re having fun. For it was a mere 9 ½ weeks ago stocks were as desirable as a hug and a kiss from a Mexican lover, a point President Obama made note of just a few days ago re he and Hillary. For the bulls, these 9 ½ weeks were like the movie of same name – hot. However, the bulls (including many new converts, especially from the land of momentum lemmings – the hedge fund world) should not forget that in the movie the lovers (Basinger and Rourke), drawn by the heat of the moment, have something as substantive and sustainable as a chimera.

At the historical average P/E of 15 times an optimistic $60 operating earnings number for the S&P 500 for 2009, stocks are projecting a robust earnings rebound into 2010, a point made by my “Beyond the Sound Bite” guest from last week, Subodh Kumar, with a $75 call for next year. Only if that occurs AND/OR only if one accepts the talk I hear from some institutional investor circles that a P/E above its historical average is fitting for the times courtesy a low inflation rate (18 times is the number I hear), can an investor find fundamental support for the fragile technical analysis base stocks have built. However, it does give one pause when the leadership for this market is the same leadership that existed before the great tumble. Generally that is not how new bull markets get started and sustained, as the more common occurrence is for new leadership to take the helm. Rather, bear market parades are led by those who led before.

Investment Strategy Implications

9 ½ weeks ago I argued that stocks were grossly undervalued. Now, 9 ½ weeks later, stocks, while not grossly overvalued, are more than fully valued. Built on the sand of a fragile technical analysis bottom led by those who led before make it more than justifiable to take some money off the table – most conservatively done by maintaining whatever the current equity percent of one's total investible assets at the current level, which in accounts that I manage is in the low 90% range.

In many respects the movie 9 ½ weeks was a study in extreme behavior devoid of real meaning and lasting substance. So, it is interesting to note that the stock market movie of these past 9 ½ weeks has brought out these qualities of extremes, including the expectations of more than a few investors with calls for more upside surges or great plunges. Therefore, allow me to offer an alternative view to this edgy thinking with a reference to another character from Tinseltown – George Costanza. Perhaps what investors will get in the coming months is a stock market movie not about heat but about nothing. A drifting, sideways, mini range-bound market where selectivity matters more than trend following, lemming-like momentum investing as investors digest what has occurred and guesstimate what 2010 has to offer and the appropriate P/E.

In such an environment, you can keep your (slightly bearish) hat on.

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Quotable Quotes: The Art of Deception

Vinny Catalano, CFA — Fri, 23 May 2008 09:44:00 GMT

It is fascinating to listen to all the pundits wonder just when Senator Clinton will drop out of the race. What amazes me is how they accept at face value her statement that she will stay in the race “until we have a nominee”. To most, that means whenever either candidate reaches 2026 delegates. However, for those of us schooled in the language of Clinton-speak (the meaning of is is), perhaps it means when the Democrats actually have a nominee – which, by the way, isn’t until the convention in August.

Therefore, to the beer –chugging Senator from Arkansas (via New York) on this Memorial Day weekend in the US let me offer these words from a person who did not dodge a bullet from a sniper:

“You may deceive all the people part of the time, and part of the people all the time, but not all the people all the time.” Abraham Lincoln

Have a good weekend.

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Quotable Quotes: Thank you, Mr. Obama

Vinny Catalano, CFA — Fri, 09 May 2008 07:09:00 GMT

Bush, Clinton, Bush, ..oops..

Thanks to Obama (and barring an unforeseen disaster in gun-happy America), the dynasty of dysfunctional political family rule has come to an end.

“It's exciting; I don't know whether I'm going to win or not. I think I am. I do know I'm ready for the job. And, if not, that's just the way it goes.”

George W. Bush

“I'll be glad to reply to or dodge your questions, depending on what I think will help our election most.” George H. W. Bush

"You know, if I were a single man, I might ask that mummy out. That's a good-looking mummy" Bill Clinton, looking at "Juanita," a newly discovered Incan mummy

“An election is coming. Universal peace is declared and the foxes have a sincere interest in prolonging the lives of the poultry.” T.S. Eliot

Have a good weekend.

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Quotable Quotes: Wishful Thinking

Vinny Catalano, CFA — Fri, 25 Apr 2008 16:41:00 GMT

Despite the events of recent days, Hillary Clinton and investors in the Financial and Consumer Discretionary sectors may have something in common – wishful thinking.

“Nothing is so common-place as to wish to be remarkable.”
William Shakespeare

“They say that nobody is perfect. Then they tell you practice makes perfect. I wish they'd make up their minds.”
Winston Churchill

“My uncle's dying wish - he wanted me on his lap. He was in the electric chair.”
Rodney Dangerfield

“I wish I had an answer to that, because I'm tired of answering that question”
Yogi Berra

Have a good weekend.

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