Thursday, July 18, 2013

Celebrating historic market highs with defensive positions and value hunting.....

As the headlines are racing across the screens from every direction touting the equity markets' historic new highs, Morningstar's economist, Bob Johnson, notes (in the embedded video below) some sobering facts about Q2 GDP (advance estimate due out on July 31).....worth considering....

If you don't have time to watch the interview, in a nutshell, he points out how this week's economic data has raised some concerns about US Q2 GDP, and estimates might come in under the 1.8% of Q1.  Notably, retail sales was relatively weak with the exception of auto sales, and the CPI increase at the headline level of 0.5% implies quite underwhelming real consumer spending going on.  In addition, the housing data, starts and permits, were also uninspiring, and all of this comes as business investment seems unlikely to ignite aggressively, Government spending and sequestration impacts continue to present headwinds to growth, and around the world, Europe's recessions and China's growth taking on more downside risks, all point to a first half GDP in the US that could well undershoot the Fed's presumed 2.4% target for 2013. 

Now, 'bloggees' of this blog-o-sphere will note that I'm "talking my book" in that I've been positioned quite defensively and remain with relatively high levels of cash, looking for "buying on dips" opportunities.  If Morningstar's economist is correct, I may just get my chance in coming weeks.  In the meantime, the earnings parade is providing some opportunities to buy quality names when reactions to small misses seem to be overreacted to by short-term horizon traders.  In addition, yesterday's Delivering Alpha conference, hosted by Institutional Investor and CNBC, showed the impact that celebrity type investors can have when they acknowledge a long or short in a name....witness Chanos' impact on Caterpillar and Peltz's impact on DuPont.

In any event, 'defense' remains the operative word, though value hunting is ceaseless!

Stay tuned for further granular updates....

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(Please note: This article is solely meant to be thought provoking and is not in any way meant to be personal investment advice. Each investor is obligated to opine and decide for themselves as to the appropriateness of anything said in this article to their unique financial profile, risk tolerances and portfolio goals).
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Additional Disclaimer: currently long many stocks/ETFs, including CAT.  Positions may change at any time without notice.

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