Tape vs. Growth

Thursday, May 19, 2005 | 02:57 PM

Since March 29, I've been pretty vocal in a Bear call. And to be brutally honest, I do not place a whole lot of faith in recent government statistics on GDP, NFP or CPI.

That said, there's a simple rule that must be honored:  Don't fight the Tape.

I can give you dozen's of reasons why the NFP was as artificial as NutraSweet, why a core CPI is only relevant when Joe Consumer has no energy or food expenses, and why the GDP data is a farce.

It matters not a whit. The lines have been crossed, and the underlying strength must be respected.

Doug Kass has an entire missive explaining why the unwinding of home prices could prove as grave in 2006-08 as the bursting of the stock market bubble in 2000-03.

And he's probably right about it. There's a disaster looming out there somewhere -- I can practically smell it. Still doesn't matter. When the underlying trend shifts, as it decisively has, you must adapt to the market -- not the other way around.

Sure, Leading Economic Indicators are down for the 4th month in a row; NY Fed, as well as Philly Fed, were both appreciably weaker. Its only background noise.

Looking at yesterday's data, the Nasdaq's volume was the best looking of the group, and I expect that's where most  of the gains will come from. I'm still deploying cash tentatively. My stops are a little tighter than usual, a few points below our prior levels of 10,400, 1,181 and 2,000. As the markets move higher, I am moving them up to breakeven, and then higher still.

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Thursday, May 19, 2005 | 02:57 PM | Permalink | Comments (3) | TrackBack (0)
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If you take the point of view that the market is virtually always driven by PE moves rather then earnings growth, it is all falling in place for inflation and interest rates peaking and the PE rebounding.

Posted by: spencer | May 19, 2005 3:38:10 PM

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