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“Wait, Why Am I in AIG Again?”…The Buy Anything Phase is Over

Joshua Brown says its time to disgorge oneself of one’s garbage. Maybe idiots made from this rally will finally be right. - Ilene

“Wait, Why Am I in AIG Again?”…The Buy Anything Phase is Over

Courtesy of Joshua M Brown, The Reformed Broker

Waking Up to Messiness

So you gorged yourself on garbage, chased the china plays, munched on materials and binged on beta…

Now that everything on earth is breaking 50 and 200 day moving averages, your junk food holdings are producing the inevitable tummy ache.

The good news is, you’ve got company.  Fight the urge to rationalize these holdings before they do more damage.

With the big leadership like Apple ($AAPL) and US Steel ($X) under enormous pressure, what hope do the trashiest stocks really have right now?  The answer is that they will be sold even faster than they were bought should this market continue to sell off on both good and bad news.

Greater Fool had worked fairly consistently for months as traders learned that each afternoon, regardless of the news, positions could be turned over to their new owners at ever-higher prices.

The mantra was "follow price" and "it’ll work until it doesn’t work" and "don’t fight the tape".  This led to a broadening rally that rewarded the worst of the merchandise – from small caps to functionally insolvent entities like $AIG, $FNM, $FRE to emerging spec stories to developmental biotech and cleantech companies.

Sitting in more defensive plays like Waste Management ($WM) and Wal-Mart ($WMT) and remaining disciplined with some cash made you look (and feel) like a chump while the dashing trader on the other side of the desk played Chilean fertilizer names or Peruvian silver mining names for triple digit gains on a regular basis.  The temptation to say f&*% it and get in the game was pervasive.

If you dabbled in junk and were then caught blindsided by the change in this tape that began 12 days ago, consider this weekend your chance to make things right.  Even if this just proves to be a dip and the rally resumes through February, at least this will have been your chance to take a hard look at some of the junk you’ve accumulated.

Without having a strong opinion on the market’s direction, I do feel confident that the "buy anything" phase of the so-called recovery is decidedly behind us.  I’ll be doing myself a favor and managing under that assumption, regardless of Monday’s futures.

 


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  1. Phil,
    I’m new here but have been reading your posts for months.  So I’d thought I’d get in a little closer taking more of a ‘daily dose.
    I am curious on your previous ("I like It") view of the Jan 2011 C 5/7.50 BC Spread.  Are you still recommending this or did you just kill it because C is amongst the walking dead? 
    -BTW I am glad I am not the CEO of GS.(well- sort of)  He will need plenty of protection to go out to lunch with that kind of bonus!
    Thanks  Donna D