AU EDITORIAL: Hallelujah I'm a Bear

Because by the time this goes to print, I will be back going long again. I just can’t help myself. Maybe I have an addiction. Maybe I have a problem.

I did become bearish last Tuesday and went on official record in SharesBulletin when I declared this party was over. This party, yes, but that is not to say there won’t be another party.

But here in the most perfect bear scenario in four years I did not get one email from one bear – let alone one that had made money.

As a technical purist, what really tipped my hand was finding out that Central Banks were printing new money to prop up liquidity. This is so dangerous. Sure it may have steadied the markets and enabled the likes of us to clear positions and get to the safe haven of cash. It was like a ‘slowmo’ crash with plenty of advanced warning. What we do know is that Central Banks can’t keep propping up the markets forever and eventually the markets will settle where they want to.

That is why I believe in the markets and not in the Central Banks. They are a pace behind.

Mr. Greenspan heads up the culprit list for this credit crunch for having been too free with too much cheap money for too long. Irrational exuberance? What we are seeing now is ‘irrational anxiety’.

At the time of writing our local market is down a mere 10% and some great value has emerged as many quality stocks are down a massive 20-30%. As yet there is no buying strength and so we may see further falls and see even better value in the coming days and weeks. Alas I can’t say when but it is not a time to be brave.

It sort of reminds me of the biblical story about the great flood. You have to do as Noah did and send out a reconnaissance ‘dove’ before you dive in.

But don’t fear, the sun will shine again.

Enjoy the ride!

Tom Scollon
Chief Analyst
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