Ff, the whole point of what I've been trying to get across, and obviously doing a very poor job of it as far as you're concerned, is that the various segments of the market peak & trough at different points of the economic cycle. If you can't grasp the concept, or disagree with it, just ignore my posts please as they'll never make any sense to you.
http://en.wikipedia.org/wiki/Sector_rotation
"Sector rotation is a term normally applied to stock market trading patterns. In this context, a sector is understood to mean a group of stocks representing companies in similar lines of business. For example, an investor or trader may describe the current market movements as favoring basic material stocks over semiconductor stocks by calling the environment a sector rotation from semiconductors to basic materials. Sector Rotation Models exist primarily to help investors identify and participate in new trending sectors of the stock market. A sector rotation investment strategy is not a passive investment strategy like indexing, and requires periodic review and adjustment of sector holdings. Tactical asset allocation and sector rotation strategies require patience and discipline, but have the potential to outperform passive indexing investment strategies. The primary driver of sector rotation is the variability of currency values (inflationary, disinflationary, or deflationary) and interest rates. As the economy expands, demand for raw materials creates inflationary pressures, which in turn prompt higher interest rates, which increase the value of the currency, which reduces the competitiveness of a country's exports as the currency causes them to cost more to other countries. This final stage causes the economy to contract, reducing demand for raw materials, which creates deflationary pressures, which in turn prompt lower interest rates, which decrease the value of the currency, which increases the competitiveness of a country's exports—creating a new market cycle. The relative strength of commodities, bonds, currencies, and stocks shift in this changing monetary climate in a somewhat predictable manner."
"Successfully investing in the stock market is a difficult and complex task, but it doesn’t have to be. One way you can simplify the process is to follow a strategy called sector rotation. Sector rotation is the idea that you want to invest in areas of the economy that are expected to outperform based on where we are in the business cycle. This concept is not new, but it’s worth reviewing."
"Economic Cycle, Fundamental Analysis If you've spent any time at all following financial markets, you've probably heard of sector rotation. Certain sectors of business profit more in certain stages of an economic cycle. This simple arrangement of stages provides a useful road map to traders of most stripes. Here, we'll look at the the basic sectors of the economy and the telltale signs of each economic stage. Sector rotation is an investment strategy involving the movement of money from one industry sector to another in an attempt to beat the market. It sprouted as a theory from National Bureau of Economic Research (NBER) data on economic cycles dating back to 1854. It's thanks to this cadre of government and academic economists that we know the start, end and duration of each business cycle. (For more insight, read Market Cycles: The Key To Maximum Returns.)"
Have a good read, and a look at where Basic Materials, industrial inputs, fit in the market cycle in relationship the the economic cycle.
Basically punters just don't BELIEVE the economic recovery, or its likely consequences, just the same as the market did not BELIEVE TLS could maintain a 28 cent FF annual dividend despite a written public commitment from both the CEO & Chair at the END of the economic cycle, just the point when you want to be weighting to Utilities.
Yet again I'll borrow from Žižek's extrapolation of Rumsfeld, "the unknown known, that which we intentionally refuse to acknowledge that we know".
SM knows Basic Materials are almost ready to run (could take most of this year to fully engage) but are holding off weighting to the sector, perhaps waiting to gauge the strength of the recovery, note recent upgrades to IO forecast prices. Of course post disruption the nascent RE industry has the worst sentiment and very little in the way of benchmarks to calibrate recovery but it will eventually be swept up in the change of sentiment. Lol, for what it's worth I also have a number of potential positives amongst the "unknown unknowns" that could give the RE recovery an exponential quality, i.e. RE being designed back in to new models where they were designed out of the previous when they were priced beyond their economic threshold. Not hard to understand the lagged impact there.
Anyway, just my POV, but I'm happy with it, make of it what you will.
LYC Price at posting:
29.5¢ Sentiment: LT Buy Disclosure: Held
(20min delay)