Double Dip or Sale? Daily Rant Aug 5, 2011

Baron Rothschild, an 18th century British nobleman, once said "Buy when there's blood in the streets, even if the blood is your own." Rothschild made a fortune buying in the panic that followed the Battle of Waterloo against Napoleon.  And there is no further shortage of contrarian investing advice out there. One of my investment idols, Warren Buffet once said “Be Fearful When Others Are Greedy and Greedy When Others Are Fearful” and his returns show no lack of proof of his financial abilities.

 

So with fear running rampant on Wall Street is this the time to buy? Well that depends on which camp you are in. Double dip or sale, if you believe that we are going in a double dip then I say cash is the way but if you think this is the sale before the next leg of this bull market then take Cramer’s advice and buy on the panic sell offs. However, there is an imminent problem, where is the catalyst? Now I don’t believe we are staring down the barrel of another recession but I just don’t see any catalyst to kick start the next leg of the rally. This puts Wall Street in a sort of financial limbo, where the bears are at their best but the bulls are still kicking and screaming as they go down.

 

Equity bottoms tend not to occur when there is still a glimmer of optimism, in Rothschild’s terms there still isn’t enough blood on the street but the falling knife is only a couple sessions away from hitting the floor.