Thursday, July 24, 2008

Where is the Diversity of Opinion?

Quick, what sectors are EVERYBODY talking about these days?

Energy, mortgages, banks, brokers and homies. Under that filter, up until today's rout these were your big movers and nothing else existed. Sell energies, buy financials!! There was no other game in town.

Just a month ago, it was buy steel, coal and fertilizer (and sell financials). There was nothing else.

What about in 2000? Buy tech! and it will drag everything else up with it.

Getting my drift? At extreme points in the market the focus gets very, very narrow. I wish I had a study prepared for you but it is fairly common knowledge that when everybody piles into a crowded theater the danger rises. All it takes is one kook to yell fire or some company to announce worse than expected earnings and the stampede to the exits will crush the masses (thanks a load, WM and UBS).

They sure stampeded for the exits today in the financials, didn't they? But that was a knee jerk one-day panic in an otherwise soft but exhausted bear market.

But when the masses zig, the contrarians zag and we've been in biotech for about three weeks. Lo and behold the sector was up a bit on a day the Dow sheds 283 - not too shabby. Guess who else was up? Yes, finally we are seeing some more action in the consumer staples. Subscribers, we'll look at more in the coming days to go along with today's purchase (which closed higher by a few shekels today).

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