Wednesday, March 19, 2008

Smart funds still more defensive than the consensus

Was Tuesday's FOMC equity rally for real? Or should we take Wednesday's pullback as the real trend in the stock market?

A check in with the smart funds show that they are still more defensive than the consensus. Smart funds are showing a market beta that is lower than 1, or the market. By contrast the consensus funds' beta is at or slightly above 1.

There are very good technical reasons why this market should rally. It is extremely oversold and due for a bounce. However, smart funds don't seem to be convinced yet that this is THE BOTTOM. By this measure, rallies should be viewed as trading opportunities to sell into strength.


Unknown said...

Your prior post was unbelievable timing. Since I have major exposure to gold - I had been getting progressively nervous by the run-up. About a week before the Fed meeting I bought DZZ to hedge my GLD holdings. Its worked out well. At some point, I'll need to take profits on DZZ because like your inner investor I believe in long term dollar weakness and long term commodity bullishness after this contra-trend move. What I am conflicted by is the length of this move. Folks like Roubini have been calling for a price deflationary environment because of the predicted deep consumer led recession. Your continued commentary on this unfolding situation would be appreciated.

Cam Hui, CFA said...

Thank you for your comment. I refer you to the disclaimer:

This is not investment advice!
I know absolutely nothing about your portfolio and cannot judge the appropriateness of any of my comments to your portfolio.

Moreover, my clients or I may have long or short positions in the securities or instruments mentioned.

Unknown said...

Hope you enjoyed a good Easter weekend. I understand that your blog is not investment advice. I am not asking you to comment on my portfolio - just would love to hear your thoughts on the overall markets mentioned (some of the markets are moving rather rapidly in percentage moves that are once in a generation type). Again - thank you for all you do.