The indexes have had a nice run the last 6 days. In fact, the bounce has been about 7% or 70 points on the S&P500. There was no real news. It appears everything has changed concerning the U.S. economy in 1 week. Talk about a quick recovery! Obviously that is not the case. So what happened? As we discussed on our conference call and in recent reports, the plain fact is that the investment community has been under-invested in equities. This is more evident in the hedge fund community. They were holding about 24% cash in June. This is a huge number. The debate on the economy and double-dip recession is fodder for the media outlets and a mute point as far as we are concerned. What concerns us is -when is more capital going to be deployed into the markets? We saw a "tell" the past 7 days when it appears most managers are more concerned about missing a market upturn then they are with why it is moving. Managers have to move their portfolios around in advance of good news. We think a shift is beginning to occur. Our strategy is to play stocks that we are comfortable with the intrinsic value we think "The Street" will notice. This is not value investing. We think of it as accumulating shares in companies we think have to be bought by managers because they are under invested in a certain sector. We believe "HHH2" is currently very under-owned and will be bought in large quantities soon. Of course we keep our hand on the "trigger" if it does not pan out.
P.S. By the time the pessimists figure this out, the markets will be trading much higher. I've never seen so many "armchair" economists who are so bearish. We may be wrong; however, we have seen this many times before. As in Casablanca- Play it again,Sam.
