Trends End…They Really Do

A week like last when the damage begins (tech) and escalates (housing, banks), is always one that makes you nervous.

Only being 100 percent in cash or net short on a week like last is fun to watch. I am sure some of you were. Congrats.

The reminder is that trends end. Homebuilders big boom ended last year. Like John Chambers in 1999 thinking that the tech boom would never end, homebuilder CEO’s were caught with their pants down. This week was just more piling on. For those homebuilder CEO’s that truly can’t manage their business, it’s over and they don’t realize it. I would be amazing to hear of a reorg or failure at this point. That would be something.

History repeats itself. Period.

This cycle will likely end worse than others because the rise was broader than the tech bubble. Second, the pigs and hogs are fatter from having a global table of equities, leverage and derivatives to binge upon.

The Global bankers…well they really have no idea what is to be, so that is the worry that leads to big selloffs. Us smaller investors are not panicking, it’s the freaking so called pro’s. I don’t have those worries. I swim underneath these sharks. They are a bunch of nitwits with quick trigger fingers and huge ego’s. The less you do here, the better as always.

It has been a month since the pigs and hogs had their day with the Blackstone IPO. That is looking more and more like the top of this market for now in time, not price. Read Andy Kessler’s great article (I am a big fan). It was written just a month ago, but is the best on the subject yet.

Things should not be this easy and they truly have been. But take solice in Andy’s last line of the post:

On a happy note, the demise of buyouts in the late ’80s led to a technology funding cycle that peaked a decade later. Something productive is sure to emerge after this buyout cycle as well. Keep some powder dry.

That is the message to remember. Opportunities will come from this bust, not from bottom picking, but from watching strength. It may not show tomorrow, or next month, but it will show. Companies will hit all-time highs in a crappy environment and you just need to keep an eye out a few minutes a day for the next winners.


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