INTERESTING FEELINGS

I have been silent for quite a long time. Do not have much to say, just to note that I remain bearish for no particular reason. It is probably nature of contrarian pretenders to think in the opposite direction than the majority.

Downtown Josh (I like his writings a lot) is pounding weekly how the tide is turning and the snowball starts rolling like a train. Even EU ongoing disaster and Chinese real estate bubble correction cannot even bump it. And nothing (known) in sight can change the situation. Josh probably wants to sound balanced and neutral but this how I feel after reading him.

I try to check my temper with John Hussman’s weekly musings. Last Monday, he once again produced the calm for me. Human beings really need to belong somewhere and to rationalize everything. In business cycles though it is crucial to synchronize ones expectations with the real pace of life.

All is not well but it is really painful to remain hedged. This pain gives me the feeling of rightness (check – do I have masochistic inclinations?). It is much much easier to go with the stream, like in March 2009 (meaning not to buy stocks at that time). There is huge assumption in the sky that economy is sustainable, the Fed will be able to stop printing and deficit will shrink; and who cares if this is not true…

Stocks are high and bonds are high. Are people taking profits? Is it smart to do that now? Most think that we will ride further up. Those who are afraid of bonds sell them and buy stocks but somebody is always on the other side of the trade. For some reason, somebody is doing the opposite: buying bond and selling stock. Or people earn money and send them to former owners of bonds and stocks, who hell knows what do with this cash. Really what matters is demand and supply – on both, general market and on the micro individual security level.

I am on the edge of initiating a significant position, 3x my normal position size, approaching 10% of net worth. It is a cable company which probably will enter reorganization and it’s debt now trades at ~2.5x EBITDA. I thought that writing about this will give me some courage, for it may be a long ride without daily quotes. In December, I almost bought it at 45, in two weeks it went up to 65 and now back to 50. YTM is >30% for the next 3 years (10% would be enough for me). What is not to like? Cable is an asset in bear or bull.

It is great to have a blog and confess to ones consciousness and others. Whoever that is.