Solid Action Tough To Detect With Naked Eye
February 21st, 2007 by Buck Woodford
My view is likely colored by the +1% performance in client accounts, but it’s an objective fact that we saw plenty of sweet upside action today. It was all under the surface, decidedly not represented by the Dow Jones Industrial Average’s 48 point loss that the public heard about on the national news programs Wednesday night.
The Nasdaq 100, representing the 100 largest non-bank stocks on the Nasdaq exchange (and traded under symbol QQQQ), actually did reflect that strength — although I’ve yet to understand or research exactly how & why. We exited our short index hedge completely this morning, & since it was QQQQ-based, that worked beautifully.
Apple (AAPL) redeemed itself after a month of ugliness & Google looked good again, but most of the buying was in gold miners, steel makers & basically every other purveyor of metal. Transport stocks like railroads — our biggest holdings — also tacked on solid gains after a multiday pullback. Physical gold went absolutely through the roof (we exited our GLD long today but will seek another lower-risk buying opp).
It seems clear to me that the “inflation trade” is on, meaning the absolute best action is happening in companies that actually create and/or benefit from the rising prices of goods & services. There are enough economists in the world, and I have no idea about either the veracity or relevance of government-reported CPI/PPI numbers. I told a broker friend here in Lexington just that when he recently asked “so, you think inflation is a problem?”
My answer was “apparently.”
The QQQQ’s monster day is confusing, considering it mainly represents big cap tech. I’ll investigate the details during my market review tonight. For now: it’s rough sledding for the bears, and the best games in town are metals & transports (sans airlines, of course).
Long BNI, CSX, UNP
