November 11, 2010

Oops, there goes Cisco

Cisco (ticker CSCO) came out with earnings last night, and the top line (revenue) was a disaster.  The stock is absolutely crushed today -- down about 16% at the time of this post.  Cisco is a bell-weather stock:  as one of the largest economic infrastructure companies in the world, they are an excellent indication of the overall health of the markets.

Collapses in Cisco have presaged both recent major bear markets.  If one had used Cisco as a market timer, one would have done quite well on exits prior to broader market collapses.  That being said, this time around is likely to be different, with the Fed printing money through QE.

Cisco is telling us that the economy sucks and that the market is overpriced.  This is no surprise to anyone paying the least bit of attention.  However, the broader market is no longer trading on anything remotely resembling fundamentals.  With the fed doing QE POMO (cash injection) operations starting (again) tomorrow, the market is likely to stabilize and start moving higher again.

So, should one buy stocks?  Absolutely not.  As I've noted repeatedly since the start of QE2, the stock market is a terrible place to put one's money.  Cisco's results merely clarify the broader economic picture, and reinforce my view that an investment strategy will massively under-perform a wealth preservation strategy.  Stick with gold, silver, and consumable commodities and let the Fed and the stock market jerk themselves off.

Posted by: Hermit Dave at 10:51 AM | No Comments | Add Comment
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