The Fortress Top?

Earlier today, Doug Kass was calling today’s opening surge the "Fortress Top" as the hedge fund Fortress (FIG) went public.

I don’t disagree that hedge funds going public are dubious, given their "reliable earnings stream and safety from blow ups". 

In a note to subscribers yesterday, I explained why big cap tech was looking so risky, and why Microsoft (MSFT) was potentially ugly. Today, Cantor’s Peter Bookvar noted that Microsoft is now down 7 days in a row and down 9 of 10 trading days on nervousness
Vista sales are sluggish — but let’s not forget MS Office, or the iPod killer, Zune . . .


On a related note, a hedge fund buddy disagrees with me that sentiment has been leaning bullish, but not excessively so as to be a contra-indicator. SF thinks the general attitude has been frothy
to the point of excess. To wit: earnings shortfall seem to be deemed
company specific while good reports are proof of the economy being
bullet proof. Then there is the analyst communtiy tripping over itself
to call a bottom in SemiConductors; All that’s before we get to the GM upgrades, which are to say somewhat starry eyed as to behemoth’s problems and decreasing market share.


I Am Calling This the Fortess Market Top
Doug Kass
Real Money, 2/9/2007 10:28 AM EST

Semis Ready to Roll Again
INVESTORS’ SOAPBOX, J.P. Morgan Securities
Barron’s FEBRUARY 9, 2007

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What's been said:

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  1. Lauriston commented on Feb 9

    The uptrend on the major indexes is still intact, next week we’ll know if “liquidity” will step in to buy the dip, or whether we start the long awaited correction – maybe 5-10%? Most seem bullish still…

  2. GRL commented on Feb 9

    I bought FIG this morning on a lark, mostly for entertainment value. It will be interesting to see what the 10Qs and shareholder reports look like.

    Knock on wood, but at least at this point, I’m making money (barely), believe it or not.

  3. Michael C. commented on Feb 9

    This unusual melt up has alot of retail less bullish and less short than last year even though we are at the highs.

    Certain small retail sentiment indicators like AAII and Lowrisk are stuck in neutral.

    Heck, I think everyone and their mothers have been whipped around unless you are some kind of superb breed trend trader.

    Recently, people don’t whether to get in the market or not, and every little dip has people scared out of their wits that it is the end of the bull run and they have bought the top tick, so they sell quickly if they even did buy at all.

  4. jmf commented on Feb 9

    i agree with lauriston. the next few trading days will be key.

    As the manager of a traditional fund puts it:

    “I fail to understand why it’s a good idea for clients to take money away from me and give it to private-equity groups who charge higher fees for buying quoted shares at a 20% premium.” (nominee for the quote of the day…..)

    The real risks of private equity / ($) economist

  5. jmf commented on Feb 9

    and remember

    New York-based buyout firms Apollo Management LP and Kohlberg Kravis Roberts & Co. last year raised money for publicly traded funds in Amsterdam. Apollo and KKR didn’t sell shares in their management companies.

    Shares of Apollo’s AP Alternative Assets LP have fallen 2.5 percent since they began trading in August. KKR Private Equity Investors LP has dropped 6.6 percent since its start in May.

  6. Idaho_Spud commented on Feb 9

    Riiiiight. And the bottom is in for the mortgage finance industry and housing too.

  7. angryinch commented on Feb 9

    There was a great deal of speculative frenzy surrounding the 2000 top with investor sentiment at a fever pitch and p/c ratios scraping the bottom. I assume a similar atmosphere prevailed in 1929.

    But not all tops or key market turning points are cut from the same cloth. At the 1966 market top on Feb 9, for example, sentiment was muted to say the least. The II Sentiment Survey clocked in at 35% bulls.

    Many key turning points are like a thief in the night. They don’t always ring a bell, like in 2000. Sometimes the market tops and doesn’t let anyone know. There are many examples of important tops that were very muted from an investor sentiment standpoint.

    The most recent II Survey showed 52% bulls. Rather neutral when compared to 2000 or even the recent past. I have read many suggest that this market can’t possibly top with so few (sic) bulls on board.

    But that definitely has not always been the case in the past. Perhaps these folks are projecting the atmosphere surrounding the most recent major top (2000) and applying it to the current landscape.

    I have no idea if the market just topped or if we have years to run. But I have a suspicion that the next “Big One” will not be accompanied by trumpets and trombones but will pass quietly with little notice.

  8. OldVet commented on Feb 10

    I believe Fortress wants me to buy their shares because they want me to get rich too. NOT !

  9. scorpio commented on Feb 10

    who in their right mind would buy FIG at 40 X earnings (hedge fund run by 5 guys of recent vintage when the avg fund only lasts a few years before underperforming or actually blowing up) vs GS at 10 X earnings (hundreds of smart guys w 100 yr track record). set this one up going the othe way.

  10. S commented on Feb 10

    Buy fear. Sell greed.

    Everything about FIG is pure greed.

  11. lurker commented on Feb 10

    like the FIG top concept a lot. But I think subprime rang the bell.

    HSBC: Has Someone Banged Chime?????

    I say yes. But the market will send a Valentine with the real answer next week.

    check out the chart of MA. WOW.

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