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Danger: Bottom Fishing for Value
Headlines
"Abu Dhabi Puts $7.5 Billion into Citigroup"
"Singapore Sinks $4.4 Billion in Merrill"
How Not to Catch a Falling Knife
January 4, 2008
See Comments below
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January 4, 2008
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This chart updates
Systems Tips, "Economy Blah Blah" four weeks ago on December 7th.
The Abu Dhabi Investment Authority sunk $7.5 billion into Citigroup stock Wednesday a week ago--smelling value surely, and they could turn out to be right. In the meantime, what is Arabic for demasiado peligroso?
Likewise Singapore through its government investment authority jumped into Merrill Lynch water for $4.4 billion and maybe a couple of billion more later. As you know, Copernicus has a strong, solo bias toward growth--of stock prices, not values. The value school is willing to wait and wait and wait for value growth later, later, later. I mention all this because most of you, and I, do not have the time.
Since my last Tips comments on these two companies, they have fallen an additional -18% and -19% respectively. See the boxes in the chart above. Percent changes over the full year (see the legend box above), retain their semi-epic quality, with Citigroup and Merrill Lynch down
-49% and -48% respectively.
The falling knife. My charts don't do justice to the energy and danger in these price behaviors. See this Stock Charts picture of Citigroup to get a feeling for what I mean. Contrast that behavior with the Brazil Country ETF chart where we are still long (as of 11:20 a.m. today, Friday, January 4th.)
Brazil could fail as I write this. If it did, or when it does, its Copernicus ranking will drop out of the top two ranks, and it will be gone from our portfolio. Or if the short-term trend indicator for the Worldwide ETFs Portolio, of which it is part, should turn down, we sell it forthwith--long before, I trust, it reaches the downward vigor of C or MER.
In the meantime, we love strength and would have it about us.
Additonal comments
March 7,2008
Trust and Confidence have been the pillars of trade and commerce since the first tribes in the colorful history of mankind. What is happening in the financial markets today worldwide is a sobering shaking of these ancient requisites. Will they be restored? Well, sure. The question for investors is when?
Perhaps imminently, but not yet, it would seem.
Since the comments above, two months ago now, with mention of Citigroup and Merrill Lynch as exemplars of the cash and confidence business--which touches all modern banking and investing everywhere--they have continued to fail.
MER has dropped another 10%, and C is minus another 26% in these last nine weeks through today. This is despite the drops and infusions reported above in addition to the big declines reported in the chart legend
here in Tips last November.
A soaring financials group will be among the first signs that spring in the land is at hand.
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