Obvious break in prices
A discussion yesterday made me feeling like I have played a sucker game during the last couple of weeks.
When I had a look at the German auto industry there were important events during March and April. First, Daimler's CEO Zetsche stated in March that high commodities prices will negatively affect earnings (on that day DCX dropped significantly relative to the market). Then, there were the first profit disappointments from Daimler, Volkswagen and BMW in the end of April. The auto industry is so important for global growth. A car is one of the highest discretionary expenses a private household can make. And with weaker earnings one could easily imagine that a rout was overdue in other sectors.
It took 14 days before the global sell off started and the rout endured for a month. Then after the rebound I asked myself whether it is over and the bull market continued. Since the end of April commodities prices haven't fallen significantly!! So profits were bound to disappoint and a stampede was the only logical consequence. The short that should have been built before the beginning of the earnings season appears now obvious, if not trivial. As if there was some free money available from suckers who thought that earnings keep on growing to heaven.
Only to reduce heavily positions on May 15 was a semi-sucker play. I thought of prices going down but could not put the pieces of the puzzle together. After yesterday I could see more clearly.
When I had a look at the German auto industry there were important events during March and April. First, Daimler's CEO Zetsche stated in March that high commodities prices will negatively affect earnings (on that day DCX dropped significantly relative to the market). Then, there were the first profit disappointments from Daimler, Volkswagen and BMW in the end of April. The auto industry is so important for global growth. A car is one of the highest discretionary expenses a private household can make. And with weaker earnings one could easily imagine that a rout was overdue in other sectors.
It took 14 days before the global sell off started and the rout endured for a month. Then after the rebound I asked myself whether it is over and the bull market continued. Since the end of April commodities prices haven't fallen significantly!! So profits were bound to disappoint and a stampede was the only logical consequence. The short that should have been built before the beginning of the earnings season appears now obvious, if not trivial. As if there was some free money available from suckers who thought that earnings keep on growing to heaven.
Only to reduce heavily positions on May 15 was a semi-sucker play. I thought of prices going down but could not put the pieces of the puzzle together. After yesterday I could see more clearly.
stxx - 14. Jul, 06:35
