It’s time to have another chat about the market. I mean, who cannot chat about what has happened this week? First of all, I would like to remind you all that I an NOT a financial expert, this is NOT financial advice, and I have NOT had any financial training. This is just a fictional writing aimed to piss off Bonzo72 and Donny. Anyway, my screen name is “Skinnee” and here is my story…
The big bailout? I think that the government did a very fine job here. How can you not insure Money Market funds? I mean if Money Market funds aren’t safe, then there really is no place to hide inside of your 401K while the economy comes crashing down around you. I’ve told you guys before, most of my 401K is in Money Market right now waiting for a better entry point back into this crazy market. Furthermore, if Money Markets are now insured, then banks will be forced to give you better interest rates on deposits to compete with MMs which is good news for us!!!
But let’s be clear here, I am not rushing back in quite yet. I’m still looking for a lower number on the DOW. I still think that we will eventually hit 10,000 and possibly as low as 9,000. But how can this happen, you say? How can we possibly go lower when the government just fixed the markets and the DOW is shooting up like 800+ points in 2 days??? Well, let’s not forget about the other major problems in the economy:
<> Bank balance sheets still littered with “toxic” subprime paper
<> The credit crunch\crisis
<> People paying $4.00\gal for gas
<> Unemployment rates creeping up and up
<> A looming recession
<> No shorting until Oct 2nd*
I’m sure that there are more, but these are the ones that just popped up into my head.
But wait, you say… There is a plan for uncle same to buy these toxic subprime papers from these banks! Nobody knows the detail yet, but let’s use our heads here… Do we really think that the government is just going to write Wachovia a big fat check for the price of their subpr
Well, skineej, I spent many, many years working in corporate banking at major NYC banks, including several involving direct contact with many of the major investment banks so prominently mentioned in the press recently.
I can assure you that allowing the investment banks back into the commercial banking business is a bad thing. They were split apart by Glass-Stegall because of the egregious misuses they made of commercial system; kind of like letting a coyote into your hen house, and nothing I have seen in the way investment banks behave leads me to believe they have changed at all.
Now that the kindly taxpayers have been screwed once more, the IB types are laughing their rear ends off at what a bunch of idiots we and the government are. I am sure there are planning sessions going on as I write this determining what vehicle the IBs and Hedge funds can devise to screw us all again. (Reverse mortgages look like a good prospect-high rates and fees, not too bright borrowers-but plenty of them, poor regulation etc, etc.)
Americans have become a bunch of sheep. There was a time when a rip-off of the magnitude we are all so quietly witnessing would have caused riots in the streets.
BTY, don’t think for a second that the folks who brought you CDS, CDOs etc did not know what a disaster this paper would eventually create.
They are a truly venal bunch.
I put in a stop-loss order on some stock this morning at 8:00am and it sold as soon as the market opened. Thank God because the stock took a nose dive today. Skinnee, well said! What I want to know is if my tax money is going to bail out a company that paid it’s executive officers millions and millions to run the company into the ground, why isn’t someone going to jail?
well first of all, much to skinneej’s chagrin, this post is NOT meant to piss him off.
our credit markets are in trouble, yes. debt is becoming more difficult to sell, yes. the dollar is being beaten like a red-headed skinneej and obviously we have forgotten to tap our gas and oil reserves to account for a relatively minor disruption in both.
fear and greed. the two basic emotions anytime one penny is at risk. no doubt there is a tremendous amount of fear in the markets today. plus the housing industry, plus the banking industry, plus the investment firms (which are no more), plus the commodities, plus my beer fridge (another story entirely). I am not going to try to second guess what caused us to get in the situation we are in. as an investor I am looking for opportunities in the future. having a sizeable stake in Goldman Sachs I was very glad to see Warren Buffett show some pretty serious support of them (in the tune of $5 Billion). although GS is down 50% from it’s highs last year this is a too-oft repeated story on the street these days. in every industry there are smart guys (and gals), somewhat smart guys and dumb guys. the dumb guys usually don’t last very long and are weeded out via their tactics and structure. if you know what you are doing then you know what you are doing. take a look at Thornburg Mortgage (TMA). they specialized in jumbo loans (over $400K). why, in times of financial crisis, should a jumbo loan originator suffer the same wrath as a Countrywide Mortgage, specializing in subprime, who loaned money to every warm body who could fill out a loan app? simple…FEAR.
I do not deny we have some serious issues ahead of us. the election will now focus more on economics. Americans do not want to pay $3.73 for gas for the rest of our lives. We do not want to have our banks in jeapardy. we certainly do not want our dollar any more devalued and we all want to catch a full cooler of scrimp every once in a while.
this congressional bailout will either be passed by Sunday eveni
“I still think that we will eventually hit 10,000 and possibly as low as 9,000.” – Ouch, ouch, ouch… Today was a scary day. Keep dropping baby. Keep dropping!!!
So at what point will you re-enter the market instead of parking in it?
You can’t time the Market,but you can spend time in the Market.
If the bottom is in the DJIA or we are even close it’s a mighty good time to put “dry powder” to work…
I’ve already started to creep back in. But only with money that I don’t need for a while. With my 401K, I will slowly dip back in, but it’s a little trickier since you get end of the day price (not real time). In my non-retirement stuff, I’ve started buying some stuff, but only with money that I don’t need for a while. And the stock that I have been buying has been dropping and I am buying a little more each month. I really believe in it over the next 5 years and they have a zero debt balance sheet, so I am not worried about them going bankrupt. They are even carrying a PE of less than 10 (historically they are 22), have cash, and pay 2% dividend. I consider them a “growth” company, but they are priced like a blue chip.
I think at this point, even though this isn’t likely the bottom, a lot of stocks are probably priced just right. A lot of speculation is gone, so in the long term, there are a lot of reasonable prices out there. In the short term though, there is still a lot of panick which will cause more people to move out of the market causing fund managers to sell when they don’t want putting more downward pressure on the market. Basically, there was a lot of “false growth” from the growth stocks over the past 5 year bull market and we are probably have erased that now since we are at 4 year lows. But, if panick continues to push it down more, then you will start to see a lot more good deals out there before we eventually pop back up to where we
dollar cost averaging over the next few weeks on companies that have been dragged down with the rest of the panic could result in some very attractive positions in the next year. my DCA move in BAC was blown up today, but the dividend still remains pretty strong.
You sure? They cut their divided by 50% on monday. They went from 64 to 32 a quarter. A 4% yield is still nice, but banks scare the bejesus out of me right now as their “fundamentals” have severly eroded… I think they are still a “falling knife”.
On a lighter note, you can open up a checking account online with coupon code CH75OLL and they will give you $75 on a deposit of $25. That ain’t a bad deal if you were looking to open up a checking account.
I have no idea what is going to happen now. The recession will be long and dark, therefore, I definitely don’t see a sustained explosion in real growth for the next 18 months. But, I don’t think that the DOW will go to 0 either. I just moved about 10% of my 401K back into an S&P tracking index fund today. Heck, at 35% off the sticker price, I had to buy some of that. I’ll keep buying it if it keeps dropping.
That being said, I wouldn’t be suprised if we get another one of those panick reversal days where we are down to just under 8999 points and then we blow it out up to 10,000-10,200 again over the matter of a couple of days. Once it get’s there, we turn south again.
Really, expect to see a short term explosion in the very near future (maybe tomorrow), but it’s just another bear market rally.
Still, you couldn’t pay me to put my money directly into financials, home builders or any company that has a high debt since they could go bankrupt and then go to ZERO. If you are going to bargain shop, look for companies with 0 debt, a positive EPS, and a growth multiple that is way above it’s current PE. Don’t fall for the super high dividend yields as they just haven’t been cut yet, but check out the ones that have a decent dividend (2-5%). Also, I wouldn’t spend any money that I don’t need for the next 5 years.
