Friday, July 21, 2006

My inspiration in this bear market

I'll start things off with one bit of advice. The one thing I learned relatively early was never listen to James J. Cramer. His recommendations almost killed me before I even really got started. I won't go into detail here given that there are plenty of Cramer bashing blogs out there and we don't need another. Let's not get sidetracked here. My point is that his site (http://www.thestreet.com/) did find me my first market inspiration, namely Barry Ritholtz. (http://bigpicture.typepad.com/). He has really opened my eyes to many things going on in the market and kept a steady stream of great information on his blog.

My second influence in my bear market style is William O'Neil. Oh yes, the king of CAN SLIM! I have based my shorting style on his book "How to Make Money Selling Stocks Short". Although I absolutely abhor his politics, one can't argue with his investing record.

My shorting thesis is this:

The Macro argument:

  • The economy is slowing down
  • We have high, inflation fighting, interest rates and a hawkish Fed.
  • The yield curve is inverted.
  • Consumer spending will decline in with the rise of high energy prices
  • Housing market is tanking

The Market's history:

  • Previous market leaders go down in flames in the subsequent bear market
  • Cyclical stocks lead towards the end of bull market
  • Cyclical stocks lead the market down in the bear market

I'll be using technical analysis to present my shorting opportunities.

Simple, eh?

8 comments:

Barry Ritholtz said...

Thanks for the kind words, Paul!

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