Wednesday, October 28, 2009

Tech stocks look ugly...

Much of the rally since March has been premised on Tech leading us out of the recession. Many tech stocks have doubled off of their lows this year, but that leadership seems to be at risk right now. The last week has seen a number of rallies fade into selloffs and barring a big rally at the end of the day (certainly not unheard of) that Nasdaq is looking at a 2%+ decline today. It's been almost a months since we've had a move like this.

Much of this seems tied to surprising strength in the US dollar. Again, this is one of the weird connections of global finance. A couple of months ago, the US economy looked very weak relative to the rest of the world so our dollar fell, which drives up all asset prices (stocks, gold, oil, corn, etc). Now, it appears that the rest of the economies in the world are struggling just as much as the US, so people flock to US dollars for safety, which pushes up the dollar and hurts prices of stocks, gold, oil, etc.


One thing I'll be watching is to see if people are ready to call it a year. If you are one of the few money managers that got it right this year.... you bought in March or April and you're up 50%-60% on many of your holdings. Depending the structure of your fund, if you sold everything and called it a year, you could be in line for a huge payday (if you run a hedge fund that is taking 20% of the trading profits). It would be extremely tempting to shut it down for the year and wait to collect your big payday rather than watch your bonus pool shrink as the market retreats. This might just be a blip on the radar, but some big stocks are showing cracks (Alcoa's down 15% since Monday, Apple's down 5% since earnings were anounced) and I think the flow of funds around Wall Street might be very telling in the next few weeks.


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This is a stunning article on the number of people doing strategic defaults on their mortgages in South Florida. I recently looked at condos in the Miami area and there are 21,000 plus condos for sale just in Miami!

"Andres Duque thought he got a real steal when he paid $125,000 for his Little Haiti condo. But four years later, similar units are selling for $35,000 and even less.

And so, faced with the prospect of being underwater on his mortgage -- owing more than the unit is worth -- for the next 20 years, Duque, 33, made what seemed to him like a rational choice: to cut and run.

He stopped paying the mortgage, basically forcing the lender to take the condo off his hands through foreclosure."

Whatever happened to the stigma of being a debtor? Not paying your mortgage and squating in your condo? The house market in bubble areas is YEARS from recovering.

Cheers!

1 comment:

George (Penny Stock Investor) said...

I am traditionally a Penny Stock Trader. I am now looking at Large caps.