This blog post originally appeared on RealMoney Silver on Jan. 8 at 7:48 a.m. EST.My "seeing eye" says that I should back off from my bearishness over the short term -- if only for a couple of percent rise. I believe a momentum low might have been hit on Friday and that there was some evidence of bullish divergences beginning to appear yesterday. And I suspect, over the short term, equities might hold yesterday's S&P low of 1406. Could it be that the concerns I have voiced over the past two years have now been discounted in the markets? After all, Citigroup ( C) no longer trades at $54 per share; it stands at $28. As well, the stochastics are starting to flash green (buy). If we are seeing some positive signals, it's not due to the constant harping of market commentators that all has been well. Over the past two years, I have chronicled the likely deterioration in the U.S. economy -- first on the basis of the ramifications of the spillover in housing and later owing to the developing subprime crisis and its likely impact on the ladder of credit. I opined that the impending seize-up in the credit markets coupled with broad investor optimism laid the foundation for weakening personal consumption expenditures, capital spending and a drop in equities. Citing my concerns in more public forums led to criticism and even sometimes ad hominem attacks from permabulls, whose dogmatic "happy talk" continued daily. Those permabulls, in the main, have now retreated to discussions of the long term, as the short term has grown uncomfortably clouded on many fronts. Credit markets remain in disarray, our leading financial institutions have lost billions of dollars of permanent capital, profits are turning negative, and the credit markets signal a "flight to quality." The shibboleths of "Goldilocks," "America is on sale" and "the greatest story never told" have become catchwords for the permabulls. Surprise, surprise -- the world's economies are cyclical, the credit markets are nonsupportive of a material expansion in foreign acquisitions of U.S. corporations, and the U.S. economy/stock market turned out to be the greatest story ever sold. Stated simply, those shibboleths have failed to occur and have failed to sustain and buoy U.S. equities. There is no crying in baseball, stock markets or politics.
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"Although those quantitatively inclined would disagree, to me, investing is much more an art than a science. Intelligence, experience, diligence, a knowledge of history, an open mind and an obsessive nature are all important ingredients for the successful hedgehog -- as are intuition, imagination, flexibility and maybe just a touch of the seeing eye. How you mix and match, or what is the optimal combination of these characteristics, is beyond me. There is no single style. ... "Barton Biggs' Hedge Hogging is one of my favorite books on investing of all time. (I particularly loved Chapter Four, "Short Selling Is Not for Sissies," as well the section on my buddy, the Bearded Prophet of the Apocalypse.) Biggs is right: "
For all its frustrations, being a professional investor is still the most intriguing, challenging and overcompensated occupation in the world.... Only egotists or fools try to pick tops and bottoms."
--Barton Biggs, Hedge Hogging