In a Word: Numb.
May 15 2008 - Mike Williams - Morning Minutes
Good Morning:
This will be a bit rushed but the major points are clear. More tomorrow and in your weekly review this weekend as I provide insights into what we saw on the road this week.
It has been a very hectic week out here at the conference. Nine talks to the audience over the 4-day period has provided a strong sense of how "they" feel. The good news: By and large, to a very significant extent, they hate stocks so much, especially US stocks, that I doubt anything other than a very substantial series of new all-time highs, will bring them back to the market.
This emotion is supported by the money flow data we post here for you inside when released. They have been net sellers of domestic equity funds (including massive dividends) for the better part of the last 15 months. The only other time this has taken place has been at the end of a 30-month bear market....some 5,000 Dow points lower than where we are now.
Fed Speak
There has been a lot of it this week. The bond market has been watching...rates are rising and panic is leaving the system. The Fed is sending a message....speed up your process of getting your financial statements and liquidity back in order. It has been a significant improvement but there is more to be done. Let's be patient with this as well.
Risk Taking?
Soon, much of this capital will realize they may have bought the low yields of the decade. The world is changing for more dramatically than most recognize. We are getting lost in the minutiae and losing site of the idea that grand things are ahead, if one is willing to accept that the US is no longer the most important element in all things.
Buyouts are reappearing...and the wealthy funds and big names are taking the first steps. There are trillions of dollars that have misunderstood this fracture as the end of the world, rather than a great lesson and a cleansing process. For the patient investor, recessions and panics provide the best values in the world for the long haul.
Sell In May and Resistance
Watchers have clearly seen the last week or so has been affected by the resistance issues we pointed out on your charts earlier in the week. Patience will be demanded here. Quiet your mind as we want to see this battle unfold. You want it to be a tough battle, with maybe even a plunge or two in it. Once breached and tested, this resistance band will likely stand as new support for many years to come, in spite of the massive expectations that we have seen our better days.
Ignore the Inflation Read
We all know it is higher than we saw yesterday in the government release. mark it up as getting hidden in the seasonal adjustments. Watch carefully though. The corporate world, though stressful and not without potholes along the way, has found a way to swallow a 12 times increase in the cost of oil over the last 8 years.
Not a person on Earth saw this big an increase coming. There may be more in the future...but just gold a few weeks ago and wheat before that and real estate before that....this trade has become too obvious and too fought for....crude, like other markets, does not grow to the sky.
The Bottom Line
- You try to never buy stocks when the sky is all blue.
- You buy stocks when you see nothing but thunderstorms.
- As the horizon clears, they get more expensive. Look for shallow and long....demand patience and discipline.
- The crowd if absolutely petrified....they are hunkering down and the data may get even a bit weaker but the market already knows that...so let's try to find a way to get over it too.
- Getting deals is never fun and demands you being willing to take bad news for a bit of time as each step is taken.