When looking at this market rally, I begin to think how this started from the recently quarterly earnings reports. In my view, the problem with this rally or believe of this bill market is that it seems very false.
Cost cuts have driven the EPS beats by most firms, however, cost cuts are not a panacea and for the most part seemed short lived. The most signicant part of the economy is the consumer, which seems to be weak. Unemployment is very high due to these cost cuts and many families will try to save and spend less to rebuild their net worth that was damaged last year. In addition, there is a high possibility that taxes will rise for everyone to fund obamas healthcare agenda.
With that being said, I believed we would see 1050+ on the s and p by labor (that was called at 820 in the archives section) but this move too fast, too soon may damper that has value is harder to come by. I believe the inner feelings of "fear to miss the rally" are here therefore I will remain in high cash levels, while the buyers who missed this huge rally come in. In my view, the same people who didn't believe in the bottom, are the buyers now, and will get hit on the downside.
As for economic scenarios and you believe inflation is the play, load up on commodities like gold, silver, oil, steel firms.
If you believe in deflation, you buy long bonds and short commodities against it.
My view is that inflation is inevitable and deflation is difficult to achieve with a printing press going but if fear comes, unemployment guys 14%, and people save to death, we will see deflation.
As for purchases, I am looking at TSYS. Its fair at 7.40 but may hit 6.50 on a downturn. Its a small cap tech that focuses on government services and text messenging. Small revenues and small non GAPP eps but Verizon is their customer and TSYS controls 25% of text messaging platform. Therefore I believe its worth 9 or 10 a share based on their generation of cash and solid ebitda.
As for sectors I like financials and tech. BAC MSFT DELL HIG PRU are some but not here at these levels
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