Treasury to the rescue!

Well a couple of good days in the markets, both domestic and foreign.  Oil inches slightly higher, just under $100 a barrel.  Gold, silver and other precious metals are on the rise as people chase something tangible.  This based on some potential losses in money market mutual funds.  Long thought to be safe havens, most individual investors and many institutions own money market mutual funds.  These funds have a NAV (net asset value) of $1.00 per share, normally, and this NAV doesn't go up or down, as the majority of the interest paid to the fund from the securities held is distributed to the shareholders as a dividend.

Just like any other mutual fund however, you are at the mercy of the securities held by the fund.  If one holds government paper (t-bills, t-notes, etc.) there is not really an issue, but if one holds short-term commercial paper in other companies (particularly financials; and financials with weak balance sheets) and those companies have financial difficulties or file bankruptcy, then the mutual fund holding those securities will suffer a loss.  Today the U.S. Treasury Department said it will support money market mutual funds whose NAV has fallen below the $1.00 mark.  This announced by Treasury Secretary Henry Paulson (check you recently printed cash, he is the guy whose signature is on the bottom right front side of your currency!  He also announced an ASSET RELIEF PLAN, by taking bad mortgage loans off the books and getting some funds in the hands of those banks that will still be around after all this mess shakes out. "I am convinced that this bold approach will cost American families far less than the alternative--a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion," said Paulson on Friday (September 19, 2008). (from Rueters)

Whew! Is it over . . . . . . .

I feel like the snowman narrator in the Rudolph the Red Nosed Reindeer television special - "tell me when it is over".

The financial markets worldwide are in flux and no markets like indecision, turmoil, uncertainty, and/or confusion.  And we all know how stock and bond markets deal with bad news!  On September 15th, we hear about Lehman Brothers bankruptcy filing (chapter 11); Merrill Lynch is bought by Bank of America and AIG (largest insurance carrier) is seeking to borrow $4o billion!  Also Washington Mutual (WaMu) is being courted by J.P. Morgan!   The Dow Jones Industrials has a large sell off (over 500 points), S&P and NASDAQ follow suit.  Overseas markets suffer similar losses.

Fed Chairman Bernanke today (September 16th), decides to keep the federal funds rate at 2%.  Economic growth appears to have slowed (inflation less of a worry at this time, or is it there are too many other things to worry about!?!?!?) and the labor and housing markets continue to be weak.  A bright spot, unless you are a U.S. oil company hoping to continue to gouge (I mean profit) from increased oil prices, is watching the barrel dip below $91 a barrel.  So, less than $91 a barrel, hurricane over, . . .  . when are we going to see some relief at the pump!?!?!?!  I paid $4.15 a gallon yesterday!

In a market like this the only thing I can say is focus on preserving your capital and don't take any long-term position that would be tough to liquidate!  There will be "fire sales" which are great opportunities for those with the means to get in at a low level and ride the quality companies back up.  Remember your asset allocation strategies, time horizon, risk tolerance and you make decisions.  Never pay attention to someone who gives you a "hot tip" or rumors from a cocktail party.  They rarely pay off.  Part of winning in the investment game is being in first when the price is low and getting out at some point on the way up (as the exact top is too hard to predict).

So keep your head low and your wits about you - this market is very bumpy!

Market news

Well, oil is still hovering around $103 a barrel, which is significantly lower that where is was this summer.  You would think my pump price would not still be $3.96/gallon (up $0.25 in one day!).  Well, the speculation is with Ike heading toward Texas, there could be some supply interruptions from that area.  OPEC announced it will have a "modest cut" in production, but experts still think the crude prices will be lower in coming months.  Apparently just not in my neighborhood - we will see!

RIM (maker of the Blackberry) has a new product - flip phone version (Pearl 8220).  Apple has come out with two new products (or should we say to updates to existing products), with its new iTouch and new 4th generation iPod nano.  A little more storage capacity, some colors choices, and enhanced capabilities are what are in store for anyone entering the fray for the first time, or to get that "other" device.  RIM is going to move away from the flat, touch screen type of product, where Apple intends to focus its development in that area.  I think I can see Apple's product focus, the Shuffle for small, portable tunes - the Nano for more storage, photo, video possibilities in a portable, small package, the iTouch for those that want all the bells and whistles but already have a cell phone, the iPhone - does a bunch of stuff (though some may say it is limited in storage), the the classic iPod which will only be available in 120 GB models is the multimedia storage portable device.  Which company makes the better long term investment?  I don't know.  I do think the record of Apple speaks for itself, though it is hard to make up that type of growth year in an year out with new products, software, extras (iTunes, App Store, etc.).  I think the big worry there is what happens when Steve Jobs decides to step down.  Is there a secession plan???

The U.S. Markets rebound a little today, though European and Asian markets continue to fall.  Recession woes seem to have turned to inflation worries.  If this is the case you want to be in short bonds (as rates would be projected to rise) and away from "trendy" type stocks unless they have a great story and look at "staples" (defensive stocks) until the election on November 4th.  That is one conservative strategy (though there are some sitting on the sidelines in cash - waiting for the right time!  Coca-Cola has made a $2.5 billion offer for the China Huiyuan Juice Group.  This Chinese company was said to have a 44 percent market share, so Coke is getting a great foot into this market in a big way!

Politics and the markets

Well, we now know who will be facing off in November.  Obama/Biden vs. McCain/Palin.

Regardless of what happens, there will be a "First" on November 4th.  Either the U.S. will elect the first minority as the President of there will be the first elected female Vice President in history.  There has been a lot of rhetoric already and more to come.  For me, I am looking forward to the debates.  We usually get about 3 for the Presidential candidates, though there can be more; and at least one from the Vice Presidential candidates.  What I always find interesting in this buildup is how many "friends" and "supporters" everyone has now!  Once the election is over, the losing side kind of packs up and goes home!  We don't usually hear from those two on the short end, for about 4 years if then (think Walter Mondale, Geraldine Ferraro, Robert Dole, John Kerry, etc.).

From a financial perspective how will the markets fare?  It is too early to tell, and I don't know if typical "republican or democrat rules" will prevail this time, and the markets, the economy and the world is a lot different now.  Will this "first" in the election cause things to progress differently than in the past. 

In the meantime you need to look for value.  You will find this by locating the best "player" in an industry that you think will be around and determining whether this individual stock was "beaten down too far".   If you "dollar-cost average" or "value-cost average" this can be a good time to add to a position.  If you invest in mutual funds, the same holds true for you.  In all cases you needed to monitor your diversification (which sometimes can be difficult with mutual funds - just make sure they are not all in the same business --- all large cap growth, etc.), your time horizon and be comfortable with your risk tolerance.  It is never too early to look for "sales" (deals on value plays) or starting to save and/or invest for your retirement!

It has been a while . . .

I am back from vacation and getting caught up on things and it has been a while since I posted.  I was hoping someone out there would have straightened out the markets while I was away!  What were you people doing out there!  Oh well, I guess I didn't really expect oil prices to come down below $100 a barrel.  Nor, did I really expect the Dow to rise back up toward 12,000, NASDAQ above 2,500 and the S&P above 1,350!  Hey we can dream can't we!  At this writing we have begun the Democratic National Convention in Denver, CO.  The Republicans will get their shot in Minnesota after this.  As this concerns the markets, we should be seeing statistics, as we begin winding up the year, as to which party would be better for the markets.  I don't know what kind of faith you can put in this, but here are some of the numbers:

The Dow is the first year of a President's term:

Republican   +3.9%

Democrat  +6.0%

Who knows what will happen this time around!

There are certain industries that seem to be doing well in this slowing economy and 3rd quarter overall will be tough.  Some of the best hanging in there (with upward revisions in earnings) are Healthcare, Aerospace, Telecoms, Financials (yes they have no where to go but up).  Energy and Utilities are showing downward revisions to earnings!  So, still plenty of time until the end of the year, but as the 3rd quarter is winding down, many people look to reallocate their investment portfolio.  This is a tough year for much and most people would not have been on the sidelines with cash, so some strong analysis not only among which sectors should one be in, but in what company within that sector!

Well, I am back from vacation!

Well it has been a while since I have posted as I have just returned from a nice long vacation!  Lots of stuff has been happening in the world, both financially and otherwise.

First, Michael Phelps has achieved his goal of the 8 gold medals - I saw most of them during vacation - an amazing feat.  I also was able to really test out the iPhone as I didn't get great WiFi connectivity in the hotel room (too far from an antenna I guess).  The 3G really worked well for checking emails and posting small messages, I highly recommend it for those who have been waiting.  I have had no trouble with the AT&T service (I was with Verizon) in my local area, and had better coverage area on vacation than I would have had with Verizon.

Well, the financial markets were in another roller coaster pattern, with fears/signs of inflation, credit worries in the financial sector, oil dips to $113 and I still can't get my local pumps below $3.89 a gallon!!!  Russia and the Republic of Georgia are in a mini war - this adds instability to overseas investments, specifically in emerging markets funds.  Some analyst feel we are only halfway through the credit crisis and financial institution failure, one even going so far as to say that Merrill Lynch could fail.   The dollar, which had been on an incredible run, is seeing some profit taking early this week, but I project it will continue to make moves against foreign currencies.  Retailers are suffering weaknesses this weak as you are juggling back-to-school purchases with a worry about what consumers are going to be willing to spend for the upcoming holiday season.  Many analysts feel that retailers will have to offer huge discounts (read little markup/profit margin) to get people to start spending early.  Will it be enough???  We will have to see!

The markets had some success for a few days as some reported 2nd quarter earnings numbers were okay in some tech stocks, however, now there seems to be worry about the third quarter numbers, so things are still shaky.  I still think you can bottom feed on individual financial company stocks, but this is risky business.  If you guess right, you will be highly rewarded!  Fannie Mae and Freddie Mac appear ready to be recapitalized by the U.S. Treasury, so we will have to stay tuned for that.

For those of you thinking about buying a small car in the year end clearance times,  for good gas mileage, here is a list of the most affordable --- the "Top Ten Rides for the 2008 Model Year", all under $15,000 MSRP:

Honda Fit

Hyundai Elantra GLS

Suzuki Reno

Nissan Versa S

Kia Spectra LX

Smart fortwo

Toyota Yaris

Kia Rio

Hyundai Accent GS

Chevrolet Aveo 5 SVM

Olympics coming this week.

With the 2008 Summer Olympic Games starting later this week, bringing together people from many countries around the globe for competition and social interaction. It is a good time to reiterate the consideration of global investing as part of a diversified portfolio. Diversification can be your best protection against risk. It allows you to balance cash, fixed income and equity investments. Not only should one do this with domestic company investments, but it is important to do this with investments of foreign companies (bonds, stocks, or mutual funds allow you to participate in these markets).

Currently, 21 of the worldwide GDP is generated by the Unites States. It is estimated that by 2030, this will fall to 10%. So, currently 79% of the worldwide GDP is generated by countries OTHER than the United States. If you only invest in domestic securities and currencies you are limiting yourself tremendously.

Watching the Olympics you will see athletes from many countries, some you may not know much about. Use this opportunity to learn about other countries, cultures, and business environments and have this knowledge help your investment portfolio. You can invest in individual securities, but it is usually much easier to invest through a mutual fund. There are a number of choices out there and some big mutual fund companies like Vanguard and Fidelity are good places to start the investigation into what is out there. There is good free information about investing, asset allocation, diversification, and risk for you to review.