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When Main Street
and Wall Street Diverge |
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Main Street and Wall Street
are clearly out of sync right now. Large cap and big momentum stocks have
come back beautifully since the massive Q1 drubbing, but small stocks are
still trading in a virtual coma- we're just not seeing the kinds of volumes
we need for breakouts.
Let me share an observation from
a recent BLOG. Tom writes regarding PhotoChannel Networks (OTC
BB: PNWIF):
"so much good news coming out
of pnwif..surprised it gave away today..i for one bought more..why is this
thing not moving after sams club,costco,australia and hallmark news…revs
are gonna go quite strong.."
On the face, it's a pretty simple
question. However, I chose to share it because it gets right to the heart
of what's going on in today's microcap environment. Some of the big Mo
stocks of the last bull market- AAPL and RIMM (I am getting
killed in some puts on RIMM) to name two, are cranking right back up the
charts in a big way. There seems to be plenty of capital around to fuel
major moves in these issues, and just about anything in the energy patch
is tagging along.
However, stocks of microcap companies
that are delivering quite exciting events- SPKL and PNWIF
to name two that I happen to follow, are pretty much frozen on the screen.
Sure, there are probably a few micros around trading pretty well, but not
too many.
There's a reason the microcap switch
is in the "Off Position" right now, and it goes right to the heart
of the differences between Main Street and Wall Street.
Wall Street is controlled
by thousands of fund managers fighting their way into "crowded" trades
and chasing performance. They have billions at their disposal, and manage
a lot of foreign money earmarked for mid to large cap stocks. The world's
wealth can come pouring into our markets as stocks firm rather easily,
providing lots of capital to all participate in the same great companies.
Wall Street was able to write
down the excesses of the past real estate bubble (see sub prime mortgages)
in fairly short order. Money simply flows from one place to another. Our
money flows to oil producers, and they in turn reinvest in our markets.
Microcaps are a bit different. Us
regular folks on Main Street are living a whole different reality,
and we are the ones who like small stocks. A normal Saturday's errands
can be quite unnerving. Stop and fill up your tank- $50 a year ago- $80
today. $100 at the grocery store is now closer to $130.
The exorbitant price of consumer
goods is coupled with a constant media barrage of foreclosures and devalued
residential real estate. Is it any wonder individual investors are reluctant
to part with their hard earned cash? Hardly.
Oil blew right through $120
per barrel today. It was $50 a year ago January. That's a parabolic
move and pretty harmful to Main Street USA.
As I have written in the past- we
have a arrived at the stand off point, and we really need to get to the
Tipping
Point. The Tipping Point being the time when micros start to
behave a bit better, and money starts to flow back into this sector.
Is it because the individual investor
in the US is now officially broke, and has no money left for speculation?
Absolutely not. Investors always either have or find money when they perceive
there's money to be made.
So what's it going to take? I believe
it's pretty simple- We have arrived at the point where micros are done
selling off. We are at the point where they are now trading sideways on
light volume in extended consolidation phases. I don't think we're too
far from seeing some stocks start to move up, and as they move up, volume
will materialize and money will flow in.
Of course, the summer months are
looming. Any long term reader knows I prefer to put money on the sidelines
during the low volume, slow death summer months. A lot of money has been
made by simply selling your favorite small stocks in May, buying back around
August first, and selling in December. It's that simple.
This year, I believe it might be
different. Why? because the calendar flipped this year, and we had the
summer sell off in Q1. In fact, the Bear Market really started in early
November, and carried through to the end of March. The Bear Stearns life
line was the catalytic event in the big cap world that sent money back
in with confidence. Micros need their own Bear Stearns type event in the
near future.
And, speaking of the future, I was
quite taken with an observation I read in my favorite technician's morning
newsletter today. Consider the following statement from Adam Olensis:
"The US economy has an opportunity
to lead the way in the development of renewable (and preferably green)
energy sources and infrastructure. If the opportunity is seized, the benefits
could be as large or larger than were the benefits of building out the
railroads, the electricity grid, the copper-wire telecom infrastructure,
and/or the optical network. If this opportunity is squandered, the
detriments will likely include ceding economic primacy to other nations
and cultures."
The only way to get oil prices down
is to lower demand. This year, the US is consuming 7% less than in past
years, and global demand is increasing. Globally increasing supply is not
keeping up with increasing demand- hence higher prices.
Here's where all this is leading.
I haven't provided any new microcap ideas for some time. It's not because
there aren't plenty of great ideas flowing across my desk daily- it's because
I don't have a sense of urgency to cover new ideas in this anemic market
environment.
I'm going to be covering at least
two new ideas before the end of the year, and I've been working on both
of them. One of them is a very exciting alternative energy idea with real
revenues and profits. We have to be in alternative energy and green energy
technologies for the next 5 years. We're going to make a lot of money in
that space. I have a couple of other strong ideas in the pipeline in the
"Green
Theme".
For the time being, I am going to
continue to focus on the existing coverages, and try to deliver some good
short term trading ideas to help you make money. New micro ideas will come
when the small stock end of the market picks up again.
Home Page : www.otcjournal.com
Email Questions or Comments To:
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