It's been over a month since I last posted a blog. It's incredible how much can happen within a month. Here's what went down. Around February 10th, the market began a steady free fall over the course of a month, with the S&P and Dow dipping below the November 2008 lows. We were at the lowest point since April 1997 (if I remember correctly). Then came a true bear market rally, with markets up for about six consecutive days. Today ended the rally.
Economic News.
No major economic news broke today. Yesterday, however, was a suprise Fed move to purchase $300 billion of US Treasuries and over a trillion of Fannie and Freddie securities. Known as quantitative easing, it is argued that the Fed took the surprise approach to demonstrate that it is deadly serious about ensuring that credit markets are brought back to life.
Market Reaction.
Yesterday's move by the Fed caused a rally in equities, but, as economic fundamentals would suggest, bond yields and the dollar fell dramatically. Some fear that continued quantitative easing will create significant inflation in the medium and long term that will be difficult to contain. Also, many are worried that the Fed is stretching its balance sheet to unprecedented levels.
China is in the uncomfortable position of having to continue to purchase US Treasuries, despite the increasing likelihood that the dollar will fall sharply under the weight of too much debt in the US.
Stocks.
My timing on GE in early February couldn't have been worse. Despite the dividend cut to preserve cash (which investors reacted favorably to), GE's debt rating was ultimately cut. Before the cut was even announced, GE was battered and I saw it fall from about $12 (where I bought in) to $6!! Only after the cut and the S&P's "stable" outlook did GE begin to rise. It also rode the bear market rally. Let's hope it gets back to $12 or higher.
Ambac went down to .50 cents. I SHOULD HAVE BOUGHT IT!! Since that low, it's now back to about .90 cents. That's almost a 100% rise.
Mental Investment Note to Myself
The markets are unpredictable. Understand the trends as much as possible. When you see a stock that is completely undervalued, buy it. Don't hesitate. Otherwise you'll see, in some cases, 100% returns pass you by.
Thursday, March 19, 2009
Monday, February 23, 2009
Nationalisation
Economic News:
The word of the day was apparently "nationalisation". At least according to Bloomberg and on wall street in general. The US government reiterated its stance that private ownership of banks is the way to go, but it has not yet come up with a plan that demonstrates this belief. Instead, uncertainty and lack of details continues. Moreover, Greenspan stated last week that temporary nationalisation may be the only way to overhaul the financial system and get the economic back on track for sustainable growth. And Paul Krugman today agreed with Greenspan's view, noting that major banks, mainly Citigroup and B of A, are effectively zombie banks and the US government has very little choice but to temporarily nationalize them.
Market Reaction:
Stocks continued their slide from the previous week as investors demonstrated their frustration and the lack of certainty surrounding the bank bailout plan and the possibility that equityholders would be wiped out in the event of a nationalisation of the banks.
I think it is safe to say that we are in the midst of a downward trend and there's not much that can be done to stop it, except for concrete signs that the economic decline is at least slowing its pace. And any such signs won't be coming until at least the middle of the second quarter of 2009, but most likely later.
Stocks:
My stocks followed suit with the overall market. GE hit a new 52-week low at below $9 and RIMM had some downward pressure too. But I'm at the point of no return. I'm not selling; I'm riding.
The word of the day was apparently "nationalisation". At least according to Bloomberg and on wall street in general. The US government reiterated its stance that private ownership of banks is the way to go, but it has not yet come up with a plan that demonstrates this belief. Instead, uncertainty and lack of details continues. Moreover, Greenspan stated last week that temporary nationalisation may be the only way to overhaul the financial system and get the economic back on track for sustainable growth. And Paul Krugman today agreed with Greenspan's view, noting that major banks, mainly Citigroup and B of A, are effectively zombie banks and the US government has very little choice but to temporarily nationalize them.
Market Reaction:
Stocks continued their slide from the previous week as investors demonstrated their frustration and the lack of certainty surrounding the bank bailout plan and the possibility that equityholders would be wiped out in the event of a nationalisation of the banks.
I think it is safe to say that we are in the midst of a downward trend and there's not much that can be done to stop it, except for concrete signs that the economic decline is at least slowing its pace. And any such signs won't be coming until at least the middle of the second quarter of 2009, but most likely later.
Stocks:
My stocks followed suit with the overall market. GE hit a new 52-week low at below $9 and RIMM had some downward pressure too. But I'm at the point of no return. I'm not selling; I'm riding.
Friday, February 20, 2009
More of the Same
Economic News:
It's been exactly 10 days since my last post and, well, it's only gotten worse. We were warned that that it would get worse before it got better. But, in general, the economic news was mixed over the last week and half. The main focus on investors' minds has been the fear of nationalization of the banks.
Market Reaction:
Not surprisingly, the market has reflected the fears of investors. The Dow and S&P have fallen below the November 2008 lows, which had been the threshold indicator of a bear market. Now, only time will tell what will happen next, but the momentum or, "prevailing bias" as Soros would say, is to the downside.
Investments:
Unfortunately for me, I jumped in about 9 days ago and scooped up shares in GE and RIMM at what I thought to be at a great value. RIMM had fallen almost 17% before I went in, but I've watched as it sank another 17%. But this is a long-term play so I'm not too concerned. GE, however, is one stock I hoping will rebound soon. Again, I purchase it at an attractive price, but saw it decline another 20%! I'm holding on this time as I've learned from my dealings with Wells Fargo that the market sometimes just makes no sense.
It's been exactly 10 days since my last post and, well, it's only gotten worse. We were warned that that it would get worse before it got better. But, in general, the economic news was mixed over the last week and half. The main focus on investors' minds has been the fear of nationalization of the banks.
Market Reaction:
Not surprisingly, the market has reflected the fears of investors. The Dow and S&P have fallen below the November 2008 lows, which had been the threshold indicator of a bear market. Now, only time will tell what will happen next, but the momentum or, "prevailing bias" as Soros would say, is to the downside.
Investments:
Unfortunately for me, I jumped in about 9 days ago and scooped up shares in GE and RIMM at what I thought to be at a great value. RIMM had fallen almost 17% before I went in, but I've watched as it sank another 17%. But this is a long-term play so I'm not too concerned. GE, however, is one stock I hoping will rebound soon. Again, I purchase it at an attractive price, but saw it decline another 20%! I'm holding on this time as I've learned from my dealings with Wells Fargo that the market sometimes just makes no sense.
Tuesday, February 10, 2009
Dow Plunges (2-10-09)
Economic News:
So the Dow, along with the other major indices, plunged over 4% today.
Market Reaction:
The main reason for the fall was due to investors' negative reaction to the lack of details on the financial rescue plan that the US Treasury announced today.
Stocks:
Many attractive stocks now look even more attractive after today.
GE, which rose about 13% the day before, fell about 12% today. I'm considering buying GE tomorrow. The fact of the matter is, this company is still a bell weather stock and, although it faces difficult times ahead due to general economic conditions, it should survive the financial crisis.
Apple and RIMM, both great long-term companies, dropped around 5%. I should purchase these as long-term investments, rather than selling them everytime they move up 10 or 20%.
Mittal dropped about 11% today. This company has great fundamentals. It is true that it will suffer from the global downturn, but this company is trading close to its 52-week low. There is significant potential here if the US stimulus and China stimulus gain traction sooner rather than later.
B of A and Wells Fargo also look attractive. I got burned on WFC when it fell dramatically last month. Both stocks are very low. But there is so much uncertainty around what is going to happen with these large financials that I think I should hold off on moving in.
So the Dow, along with the other major indices, plunged over 4% today.
Market Reaction:
The main reason for the fall was due to investors' negative reaction to the lack of details on the financial rescue plan that the US Treasury announced today.
Stocks:
Many attractive stocks now look even more attractive after today.
GE, which rose about 13% the day before, fell about 12% today. I'm considering buying GE tomorrow. The fact of the matter is, this company is still a bell weather stock and, although it faces difficult times ahead due to general economic conditions, it should survive the financial crisis.
Apple and RIMM, both great long-term companies, dropped around 5%. I should purchase these as long-term investments, rather than selling them everytime they move up 10 or 20%.
Mittal dropped about 11% today. This company has great fundamentals. It is true that it will suffer from the global downturn, but this company is trading close to its 52-week low. There is significant potential here if the US stimulus and China stimulus gain traction sooner rather than later.
B of A and Wells Fargo also look attractive. I got burned on WFC when it fell dramatically last month. Both stocks are very low. But there is so much uncertainty around what is going to happen with these large financials that I think I should hold off on moving in.
Monday, February 9, 2009
GE jumps (2-9-09)
This is the first of my daily accounts of the financial markets and the economy as it relates to my own investment objectives and strategies.
Economic News:
No specific economic data was reported today. But Obama did continue to campaign for passage of his economic stimulus package, which has undergone substantial changes since having passed the house of representatives. His campaign follows weekend negotiations by members of the Senate in order for the bill to be passed soon.
US Treasury Secretary, Tim Geithner, will be unveiling the bank rescue plan tomorrow.
Market Reaction:
As a whole, the Dow, S&P and the NASDAQ were each generally flat on the news.
Stocks:
One high-flyer was GE. GE rose about 14%. There were two different reasons given for the rise. First, investors saw as positive Immelt's willingness to cut GE's dividend, which would provide more capital to offset writedowns from the GE Capital unit and avoid a cut in GE's credit ratings to below AAA. Another reason given was the prospect of GE benefiting from the stimulus bill and bank rescue plan. I think the latter is common sense and should not justify such a significant rise. Otherwise, why didn't all other companies that would benefit also rise?
B of A also jumped about 13% on general expectations that it will benefit from any rescue plan. But given that other financials did not rise as much, I suspect investors are simply taking advantage of a severely hard-hit stock of a great company.
Apple continues to rise. YTD, the stock is up 13% and is up over 24% from its low on Jan. 20. I think this stock, RIMM and certain other consumer technology stocks are currently on an upward trend. Let's see what takes place.
Economic News:
No specific economic data was reported today. But Obama did continue to campaign for passage of his economic stimulus package, which has undergone substantial changes since having passed the house of representatives. His campaign follows weekend negotiations by members of the Senate in order for the bill to be passed soon.
US Treasury Secretary, Tim Geithner, will be unveiling the bank rescue plan tomorrow.
Market Reaction:
As a whole, the Dow, S&P and the NASDAQ were each generally flat on the news.
Stocks:
One high-flyer was GE. GE rose about 14%. There were two different reasons given for the rise. First, investors saw as positive Immelt's willingness to cut GE's dividend, which would provide more capital to offset writedowns from the GE Capital unit and avoid a cut in GE's credit ratings to below AAA. Another reason given was the prospect of GE benefiting from the stimulus bill and bank rescue plan. I think the latter is common sense and should not justify such a significant rise. Otherwise, why didn't all other companies that would benefit also rise?
B of A also jumped about 13% on general expectations that it will benefit from any rescue plan. But given that other financials did not rise as much, I suspect investors are simply taking advantage of a severely hard-hit stock of a great company.
Apple continues to rise. YTD, the stock is up 13% and is up over 24% from its low on Jan. 20. I think this stock, RIMM and certain other consumer technology stocks are currently on an upward trend. Let's see what takes place.
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