Friday, October 20, 2006


Bush's Garbage Rally

From Smartmoney (no direct link) David Hay, Evergreen Capital Management: This decade, 2000-09, is on track to be the worst decade since the 1930s for the market. The only other decade in nominal terms that's been as bad as this decade was the 1930s. It's been a horrible period for stocks on an index- or cap-weighted basis. It's been a bipolar market — that's the way we've characterized it for 10 years. In the late '90s, if you were long midcaps, you had a hard time. If you were long large caps, it was absolute nirvana. The last seven years has been the opposite of that. The pendulum swings. What was attractive seven years ago is now unattractive, and what was unattractive seven years ago is now attractive... Another interesting comparison is between low-quality stocks and high-quality stocks. You can see that it really has been garbage rally, or a beta rally. Low-quality stocks have been outperfoming dramatically the past few years. Hay things that big cap laggards like GE and MSFT are about to rally. I tend to think that both companies are adrift and that one should look for garbage-- but good garbage, the kind that will survive a real recession.
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