Up here at 8000 feet elevation at this time of year we use our wood stoves as a constant source of heat. Sure, we have propane but the glow and atmosphere of wood makes mountain life much more enjoyable in the winter. This year we’ve been burning some of the previously mentioned pine which was cut due to Pine Beetle infestation which as you may or may not know has been devastating to our region.
One trait unexpected in burning pine has been the spike in temperature since pine can burn so fast and the point of all of this is the equity markets by my measures are spiking in temperature as well. Market temperature guaged by sentiment and the apparent lack of fear amongst traders. The uniform consensus appear that the short term prospects of the markets are rosy and the long term…blech. I’ll take the reverse of the consensus and brace for short term caution and let the markets cool off.
There can be no guarantee that markets will sell off soon but data and experience tells me a sell-off is in order, probably by the end of this quarter or early 2nd Q.
We’ve been selling of piecemeal our high flyers, of which no stock of ours has been hotter than CAGC which we primarily acquired in the low teens and is now at $38. Pine won’t grow to the sky and neither will Chinese equities. While the majority of our big winners from 2009 where Chinese, I suspect they could repeat their dominance in 2010 as no group has the combination of cheap valuation and growth rates. Sure, they have issues such as accounting and possibly an inflated Chinese economy, but so far the trends are still very friendly. I just think a “pause to refresh” is greatly in order.
The bottom line is we continue to build our cash levels and for the first time in ages we’ve added some “QID” (Nasdaq Ultra Short) to hedge our existing long positions.
BTW we are still long the “TBT” (Ultra short 10-year Treasury) as we remain bearish on bonds and interest rates.
Be careful out there
Brad
Long CAGC, QID