One thing that baffles me about the financial crisis and all of the analogies to the Great Depression is the repeal of the Short Sale Uptick Rule and Glass Steagall. If we are truly going to remember the lessons learned from the Great Depression we should quite obviously bring back the Uptick rule and also Glass Steagall which were the two most important pieces of legislation passed in the 1930′s to prevent another Depression from hitting the economy.
Here are a few things that concern me about the current economic backdrop aside from the repeal of the Glass Steagall Act and the uptick rule:
1. Escalating Debt — The fiscal deficits and long term debt issues are very real and just because we have a printing press does not mean we can export our inflation forever. Eventually, as we print more money to monetize the debt, inflation pressures will mount and standards of living will fall for the average American worker all in the name of Keynesian Economics. No one stops to think that maybe this time the problem is long term and structural and not simply cyclical.
READ MORE HERE: http://seekingalpha.com/article/449521-are-stocks-overvalued-10-stocks-to-consider-shorting-as-a-market-hedge
Here are seven fully valued (note the short-seller euphemism) stocks that could possibly tank big time because of overvaluation. Investors who are long these names should at least consider selling calls and buying some puts in our view as the recent rising tide has lifted some pretty leaky boats along the way.
The internet-related industries are undoubtedly the bright spot of today’s economy, but much of that growth is more than priced into many of the leading stocks in the internet industry. The following table shows just how expensive these stocks are. Keep in mind, over the past 100 years or so, the S&P 500(SPY) has averaged 14X peak earnings. Stocks also tend to trade for a small premium to book value — obviously internet businesses have economic moats that are valuable so this type of analysis is less effective in estimating intrinsic value. Still, numbers are all we have to go by and these names look expensive based on the hard data. High beta names often correct the fastest in market downturns as well.
NOTE: I would use stop loss orders or call option protection if you plan to short these as directional trades. Read more here:http://seekingalpha.com/article/449041-7-hyped-up-stocks-to-sell-short-now
Hey folks, I am working diligently on fixing up the www.hedgephone/network space and also on de-bugging the comments so that readers can post… I want to get Hedgephone.com into the 21st century so my readers are heavily armed with knowledge that they can use to crush the markets.
Until next time,