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Goldman Yes, Gold No
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About that bear market rally... I suspected it, then rejected it, and now accepted it. Confusing? You bet. To catch you up, on March 12 I was anticipating a rally with Gamestop (GME), Goldman Sachs (GS), and Genentech (DNA). On March 13, I had to rethink the rally as Bear Stearns (BSC) hit the market fan. There were more fits and starts this past week, but the market still wants to rally (apparently) and who am I to argue? DNA's analyst meeting was a non-event, so I dumped that one. GME's earnings were good, so I stuck with that one. Which leaves GS. [I should note for disclosure that I got stopped out of GS in my personal account, but in the Strategy Lab contest I was able to get back in. I wish I personally owned GS now, but such flexibility is not always possible with real money. Alas.] I liked GS a lot better at 150, but I still like it here at 180 because it's one of the best financials out there and financials are intent on rallying. And I do think the Fed's action allowing investment banks to access the discount window takes away a lot of the short term risk that another of them would bite the dust and drag GS down in sympathy. So while I probably won't buy more GS at these levels, I think it's a solid hold for what I see as a bear market rally. This rally, you should know, bothers me. The weak sectors are jumping while the strong sectors are sinking. With Gold (GLD) and the commodities getting whacked, many folks were caught on the wrong end, and only the quick and flexible could adjust in time. I suspect that will happen again when the next wave of bad news comes out in the financial sector, and that's why I'm holding Goldman on a tight leash. The Fed's actions were helpful in avoiding disaster, but I don't think the market will bottom until everyone realizes we're in a recession and a bear market. No sector is really safe right now. And yet, it's not safe to be short either. Here's the bottom line: You can play this rally however you like as long as you manage your risk and have an exit strategy. Go for it. I like tech (generally) and financials (for a trade). But this is not a market that rewards stubbornness. If active management isn't your style, then make smaller moves, remain heavy in cash, and watch some basketball. [Posted simultaneously on my personal blog.] | ||
