Sunday, March 28, 2010

Thinking About Denial

Everyone should see this J.P. Morgan report - "Sovereign Default Time Capsule: What People Were Saying in Real Time as Debt and Currency Crises Played Out" [scribd] - from earlier this month.

From the unthinkable, to the possible, the unavoidable, the actual and finally, the patently obvious.
Today on my neighborhood post-market run I was thinking about denial.

Investing situations generally turn on some key issue, much like a legal argument.

Credit Bubble Stocks got its start by answering a succession of these, correctly. Is it possible for home values to fall nationwide? Will they?

Sometimes, investors legitimately disagree on these key points. But at other times, the writing is on the wall and investors are either cognizant or in denial.

Right now feels like one of those head-in-the-sand, denial times in the market. Take a look at the call buying, at the complacency. I can feel it in my short book, watching negative EBITDA, negative gross margin, companies rally inexplicably.

But it's just manic short squeezing. Seriously, If you're short something and it hasn't had a couple 5% up days during the past two weeks, you should take another look!

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