What Does a Market Top Look Like…The Aftermath

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  • on June 2nd, 2012

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.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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