July 15th, 2008

This day will go down in history as capitulation was finally reached on the Financial Sector (not in the VIX). It is interesting that David Tice, Portfolio Manager of the Prudent Bear Funds (Short the Market) sold his company to Federated Investors the same day that Tom Brown of Second Curve Capital called a bottom, July 15th. If David really thought the market was going much lower he would have held the company closely while his shorts profited. Instead, he opted for a paycheck and less risk as a manager.

This brings me to commodities and hard assets. Most likely, commodities will come crashing back to earth, but Institutions are waiting to see which way the market breaks. We are at a critical point with $4Trillion in cash and the 10 day moving average just crossed the 30 day on the SPY so we are at a critical spot either up or down 20%. My belief it will be to the upside as all the durable goods orders and ISM numbers have been looking pretty good. Seems to have many similarities to 1974 when the Fed's actions were already helping the economy but not enough for Ford to win the election. By 1975 things were in an upswing but most didn't buy it. Sounds similar to today but staying out of the game does no good but promise you a loss at future buying power.