End of Week Musings

I am taking a few days in the mountains with my family and there is nothing like fresh air, snow, and a temperature of 16 degrees to clear the head and focus the mind. It has given me an opportunity to try to see the proverbial forest from the trees and I thought I would share my thinking here this morning as my family dons the snow gear for a morning of sledding.

First of all, before some of my western friends call foul, the "mountains" on the east coast are really hills when compared to their west coast cousins. We are staying at a whopping 1500 feet above sea level to give folks some perspective. Also, the image is not an east coast one, but a Canadian one from Whistler - one of my favorite spots on this planet.

Anyway, here is what I am thinking:

• The message boards are very, very negative. Tons of traders (and even long term buy and hold investors) went short and just covered or are planning to get short now.
• The media has never been more negative than it is right now about the economy and the market's outlook. There is something about having a Republican in the White House that gets them going and they have never been happier than now about bashing a situation, a President, and an economic policy.
• The market, including me, thinks that the Fed was slow to act and behind the curve. They have come on strong lately, but their "message" has been very poor. BB needs to hire a communications manager. This lack of message is hurting the policy and fueling the negativity. Regardless, recent easing will have more effect on stimulating greed than most currently believe in the 2nd half of 2008.
• Most traders have only seen the 2001 recession professionally, meaning that they lack any depth of understanding this current environment. The 2001 recession has left a kind of Vietnam-like Syndrome in place that fuels the negativity and the "never again" mentality. A lot of folks are going to cash whenever they see their shadow.
  
• The market, including me, hates the "Stimulus" package proposed by the political class. What a waste of money. As usual, they are just buying votes and continuing the War on Prosperity. Again, more negativity.
  
• Very few folks think that the bottom put in this week is THE bottom.

All these observations are leading me to be very bullish. When the conventional wisdom says one thing about the markets, the opposite usually happens. One thing that we do know is that this week's new bottom will be tested. So everyone needs to expect that 1270 on the S&P will be another buying opportunity.

That last statement means that we will go down 6% from here to retest, just fueling the negativity and giving us a mechanism to go higher. I am not willing to predict that this week's bottom was "it", but it looks more likely than not at this point to me.

Anytime that I can buy AAPL for a forward PE of under 20 (also adjusted for cash), is a time to get excited about the upcoming months.

p.s. Anybody notice ROCM yesterday? Up more than 11% on no news. If anybody knows something, please let me know.