What Does a Market Top Look Like…The Aftermath

The markets are very sick at the moment. Our mood and confidence is shaken and stirred. The math experts are out in full force discussing the Facebook ($FB) valuation.

It looks like US markets really did begin to top in mid February when I started my ‘market top’ series.

February 12th

April 10th

May 15th

It is amazing how easy this business looks in hindsight. I say ‘business’ because it is NOT a game. Friday is a reminder. Facebook ($FB) is a reminder. Citibank ($C) and Morgan Stanley ($MS) should be reminders. The $SPY is now below 1999 levels. If you are still in business managing client money that you held in 1999, the word game is infuriating. The fact that Larry Fink is not on the cover of Barron’s with a follow up to his 100 percent equities call in February is why I believed Wallstrip and Stocktwits were doable. The public is blaming Mark Zuckerberg this week, but Larry Fink is a god. Beautiful.

In mid February,as markets were breaking out (after only a 100 percent gain off the lows in 2009), Barron’s ran a cover story on Dow 15,000 and Larry Fink (CEO of $BLK with a measly $3.5 trillion under management), let people know from his megaphone to be 100 percent in equities.

Just maybe Larry was talking his book?

Maybe Larry meant to long 300 percent ‘reverse index’ equities (wink wink)?

I don’t want all the pressure of managing huge amounts of other people’s money because I don’t believe I would think as clearly. That said, if I was managing a lot of money I would hope that I would have gotten short the weakest sector into that February blog post…financials. Since April 10th, the average financial is now down 20 percent, including Larry’s own $BLK.

I know my weaknesses. I have skinny arms and a weak stomach for outsized risk. I sell too early and I buy a little late. I have made those weaknesses work for my investing and career lifestyle. That’s what I love about the stock markets and entrepreneuring.

So what will happen now?

The bulls will tell you that interest rates are extremely low. They are. There is a full on panic into T-Bonds.

If I could get me some of those low rates, life would be grand. I can’t. Your broke bank can. The 20 year old Stanford dropout with $8 million in venture capital money can get Venture debt from a myriad of banks with no real plan for profitability. Companies with record profits from job cuts can get buckets of Euros.

I feel one of those events is upon us and I will get hurt if we crash. Robert is worried it could be ‘EPIC‘ (Mitt Romney says ECIP). I am a ‘net long’ guy and I will sit on my hands until we get a better tape. There are a few guys that will crush it if the summer is horrible. They will write books, raise a big fund and underperform for many years thereafter.

For the rest of us, do less and upgrade your iPad.

13 comments

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  4. nice call.  reallly nice.  i figure if this wasd the bottom and lets hope, i am at least not short, have my longs and can ease into new winners.  i am about not blowing up at the risk of missing bottoms.

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  6. hhphoto says:

    That is very interesting you are calling a bottom when the Dow price/dividend ratio is at 37.73 as of 8/16/12. Historically a reading above 30 is extremely overvalued. Bottoms occurred when this ratio is between 14 and 17. The 1987 crash occurred when this indicator was near 40.

    • leopardtrader says:

      It the bottom of the year that occurred in June. The cycle bottom happened March 2009. The top mid-term is not here neither is the cycle top. Hope you get it. Besides I dont consider metrics as price/dividend ratio and the like in my forecasts. They happen to not make any sense to me

      • leopardtrader says:

        Closed most long positions except my very long term takes in Housing, Healthcare and some European names. I have also bought put protection on most of my long trades.
        Events that I watch showing weakness in this market here. I am scaling in short positions but not aggressively at this time. I hold the fact that 1472 in spx holds the upside for now. This pullback may be shallow but if any bad news comes in here will be extremely aggressive selloff.

        • leopardtrader says:

          Changing back my to my bull cap again here. Noticed that Smartmoney is not selling any damn thing LOL I wont fight this tape to the long side. I see another leg higher again

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