每日市场点评 --- November 8, 2007

Another roller-toaster day on Wall Street for this Thursday. Things actually started not too bad in the morning but quickly turned around after Bernanke’s testimony(although I really don’t see anything new from his speech). At 1pm, Dow dropped over 200 points while Nasdaq gave up more than 3%. When it looked like we were going to get another triple-digit down day, a sharp reverse in the financial sector pushed the index quickly higher and all indexes closed pretty much flat except for Nasdaq, which was still down by around 2%. It is certainly feeling like August 16th again and for those following my daily market update, you would remember that I made a judgement call in the morning of August 17th stating that the August 16th low would be the low for that round of correction. But the question is whether we had another capitulation day today? This is much trickier than the previous time. For one thing, the intra-day high of VIX is much lower than that of August 16th, indicating the market is not that panic after all. More importantly, right before August 16th selling off, almost all sectors had been sold off for a while so a rebound was warranted. This time, however, other than housing and financial sectors, most sectors were holding pretty well until yesterday. So it is difficult to see how everything can rebound nicely together (actually this can be seen from today’s action: when the index was bouncing back, they were mostly driven by financials and most tech names didn’t join the party). So my suggestion at this point is get hedged or simply hold cash as both Dow and S&P are near their 200-day moving average level, a rebound or a breakdown from here is equally likely.

One piece of interesting news this morning is the report that BHP was attempting to acquire Rio Tinto and this reminded me of what’s happening during the peak of the Internet bubble when American Online tried to acquire Time Warner. Although I didn’t foresee that the commodity bubble is going to burst right away, we do have some interesting statistics: when AOL announced its plan to acquire Time Warner, the combined market cap of the two companies was close to $300 Billion USD and today the combined market cap of BHP and Rio is actually more than that. During the past 7 years, the combined market cap of the latter has increased by more than 8 folds. Unfortunately for the shareholders of the former; they had lost almost 70% of their investment after the merge. It will be interesting to see whether history will repeat itself this time.