2010: A Time When Stocks Got Cheap, Then Cheaper, Then Dirt Cheap

If the move in equities and, in particular, large-cap tech (think Microsoft (MSFT), Cisco (CSCO) and Intel (INTC)) over the past two months are precursors for what lies ahead in the second half of 2010, we feel that most investors are going to be highly disappointed with where equities go from here. Still in denial about the re-emergence of the secular bear, perhaps continued moves lower in the aforementioned blue chip tech stocks will wake investors up to 2010’s market reality: valuations are being compressed.

Worse yet, valuations will become even more compressed as the year wears on. While various market pundits continue to rightfully point to a number of very disconcerting macro factors to explain the recent move back into bear market territory for equities, why not simplify matters for investors by stating that this is what happens at the tail end of secular bear markets: stocks get cheap, then cheaper, and then dirt cheap before a generational bottom can be hit.

The Inflection Point (TIP™) is a weekly long/short market newsletter focused on market trends and companies at important inflection points in both their business models and technical stock formations. TIP™ is produced each week by John Henderson, an independent trader who turned $10,000 into $4.5 Million during his tenure at Smith Barney in the 1990s, and his team of market professionals including Jason George, Tom Henderson, an Executive MBA student at NYU’s Stern School of Business, and Mike McCausland.