Other Views

I get lots of e-mails and comments about different market commentators that may conflict with my views on the market.  Many of them might even be on The Biz Radio Network as frequent guests.  Charles Nenner is one that comes on TheMoneyMan Report frequently and has been accurate as of late.  People will ask me does it change my opinion on the market when I see others that are bullish on the market.

All I know how to do is to relay to you what I’m seeing each day.  Based on what I’m seeing, I think we have more downside.  I commented last Friday I thought there was too much bullishness and I was worried about the market.  The market is now falling and we’re seeing the fear start to tick back up.  I have a lot of respect for many other market analysts out there.  We’re not all always right.  However, lots of market analysts are bullish right now which conflicts with my work.  That’s what worries me about the market.  I simply think there are too many bullish people.  Too many leaning in one direction. 

How should you reconcile conflicting advice you’re getting?  Over the years, I’ve developed relationships with several data sources, newsletters, software vendors, etc.  At this point, I know where to go for the particular information I’m looking for.  I rely on certain data for the economy, certain data on commodities, etc.  That’s what you should be doing.  Using the data that’s available to me, I’ve been able to more than double the performance of the S&P 500 since 2001 on my capital gains portfolio.

We’re always going to have differing views out there.  That’s what makes markets go up and down.  The big money comes when you trade the extremes.  Too many bulls, too many bears, etc.  We’re not at a major extreme but we certainly had a lot of people late last week turning extremely bullish.  That’s a contrarian indicator in a bear market.

GE Sets The Tone

General Electric (GE) came out this morning with disappointing earnings and lowered their outlook going forward.  It appears as though this will hurt the market today, at least at the open.   The stock looks to open down almost $4.  They typically don’t miss their estimates like this.  It’s one of the easier stocks to anlalyze as far as earnings. 

Why would one stock impact the market this way?  General Electric (GE) is a very good proxy for the entire economy.  When you own GE, it’s like buying a mutual fund.  They have so many businesses in so many different areas.  To me, probably the best company in the world.

A couple of things stand out to me regarding GE.  First, their business was hurt by the financial part.  Not a big shock.  But, they didn’t execute in other areas.  As a holder of GE, I’m disappointed.  But, if this level holds, there’s a good chance I’ll be adding to my position.  Their global infrastucture business is still solid.  They were hurt by a weak economy, the financial crisis, and lack of execution on their part.  I believe all three are fixable.  I’m not shocked by the financial crisis impact on GE or the weak economy, but the lack of execution in certain areas is a shock to the market and myself.

When there is low volume and and weak demand as we’ve had this week, the bad news can bring back in volume.  Unfortunately at the open, it’s down volume.