Easter weekend!

As the U.S. markets pause for the Easter holiday, we can pause and take a look back at the first 3+ months of 2009.  The Dow this week finally hit and stayed above 8000!  This is quite a run up from a March 6th low of 6,500!  However, I would venture to say that we are still not out of the woods, and I would really like to see a SLOW move up in these indexes around the world, as too quick will precipitate sharp rises and drops and the inevitable sell offs (profit taking) that are more of a panic action with the mindset of the general public.  There is still too much of a polar opposite that isn't related to the reality of the value equation.  When there is any good news - things go up WAY too much.  Any bad news yields the opposite result but in the same excesses.

As far as industries go, there is some upwards movements (see Wells Fargo), but there are still more problems than solutions in the financial institutions.  There is some interest in building materials and builder stocks, though I believe that there will be some mergers with the home builders which will eventually make them stronger.  Commodities will still be an interesting play as inflation is still a distinct possibility with all the government money printing going on. The U.S. dollar still making positive moves against foreign currencies, gold and silver still up and holding their own, and oil is hovering just under $50 a barrel.

Turning to the U.S. automakers - Ford appears to be the strongest, though they have about one more year of cash (at this current rate of burn through), GM is still tinkering with bankruptcy (though I believe it will be controlled with them hanging on to Cadillac, Chevy and the foreign operations and brands; while attempting to liquidate or just close everything else), and Chrysler has less than 30 dates to complete a merger with Fiat or it receives no additional money from the U.S. government.

For those of your with a long-term time horizon (10 years plus), I think there are some small glimmers of opportunities in this market.  You need to look real hard for those companies that have a product/service that is still needed during a recession like we have now, and when fixed, will still be needed in as large a quantity (or more) than now.  Look for cash flow, look for some earnings, or at least a slowing of losses, look for little to no debt.  And when you find it, you are buying it somewhere between 30-50% off!  It is easy to make money with those types of purchases!

Good week for the worldwide markets!

There is a lot of speculation on Wall Street, Main Street and throughout the global financial world as to if we have hit bottom.  I personally believe we have (for me it was when we hit below 700 on the S&P).  Now, this is not to say that we will not still be on a huge roller coaster ride for the next few years, especially as it only takes a hint of bad news anywhere in the world (or a stray comment from Obama, Bernanke, or anyone else in Washington) to knock the market down hundreds of points.  However, the month of March has shown us that all we need is a little positive (or less, reduced negative) and the markets will slowly rise.

Wall street is about speculations, perception, and prognostication --- rarely if ever about reality.  Although it operates on the basic economic principles of supply & demand, those who participate have a tendency to like extremes and quick reactions!  There is a feeling of "panic" that someone is going to miss out on an "up" or "down" chance and the "herd" mentality is rampant.  Those who generally make money do so when they go in a different direction than the herd.  It is difficult to have the patience and the faith when all logic tells you that you are so wrong and everyone else is right.  You need to take emotion out of it and do your homework to get back to that long-term focus most of us need to have to be in this market.  Timing is everything.  If you were close to retirement a few years ago, proper financial planning for retirement would have told you to take some money off the table (equity markets) and have less than 50% of your money in the equity markets.  Though bonds did take a hit in this market, they generally come back faster than the stock and stock funds (assuming no bankruptcy of the issuer of individual bonds), and short-term debt plus cash would keep you in good shape and you would not have been hit too hard during the last year.

There are a lot of good investment options out there both foreign and domestic, stocks and bonds, as well as other areas like real estate (many areas of the country are on sale 50% off).  Retirement planning in the traditional sense, was still viable, may need to consider a slightly different approach.  Check out the retirement plan adjustments you should consider.

You should be continuing to invest in your 401k, 403b as well as any traditional and Roth IRA accounts.  Dollar-cost or Value-cost averaging will assure that, over time, you will get good cost structures for your investment dollar and make sure that you don't sell out at the low and buy in at the high!

Ah . . . As the Financial World Turns

When I was a youngster, before my mother went back to work, she would watch soap operas on television.   I remember three specifically: As the World Turns, General Hospital and Days of Our Lives (". . . like sands through an hourglass, these are the days of our lives").  It is inevitable sitting on the couch, that you may glance at the television to see what all the fuss was about.  Though I remember very little, I do recall that you didn't need to watch it every day.  If you disappeared for a few days (or even weeks) and then came back to watch an episode, you could really "catch up" pretty easily.  There was not a lot going on that would change day to day.  I think this has been happening with our current financial crisis and the financial markets in both the U.S. and abroad.  That is . . . until the last week!

U.S and foreign stock markets have been enjoying about a 5 day rally, with a lot of companies (banks and financial institutions) showing very positive growth.  The retail sector, though not great, did not suffer as bad in February as many analysts expected, so that is considered positive in this market.   Commodities have moved very slowly (both up & down) with gold back under $1000 and oil hovering around $47 a barrel.

I think it is too early to call a market bottom as this market would do an about face faster than a tornado moves through a trailer park if there was any bad news!  However, this is still going to be a business-led (not a consumer or government-led) turnaround.  General Electric has lost the AAA rating on its debt for the first time, and there is speculation that it may spin off GE Capital (though CEO Immelt says no).  The cutting of the AAA credit rating leaves only five U.S. industrial companies with AAA ratings:  ADP, Exxon Mobil, Johnson & Johnson, Microsoft, and Pfizer (this one is on a credit watch since the end of January).

Fed Chairman, Ben Bernanke thinks it is possible to get out of this recession by the end of the year, assuming the politicians are ready to act.  He did admit the unemployment will not be "fixed" by then.  He also questions whether Americans have the stomach for the continued support (read bailout!) of the financial markets and some firms such as Citigroup and AIG.

So . . . . what does this mean for the average consumer???  Well, if you have 10+ years to go to retirement, you are probably still investing in your 401k retirement plan and should continue to do so (even if you employer has stopped matching), as this is the type of market environment where you can make some money!  If you buy stocks and bonds now, you are buying them on sale, and who doesn't like a good sale!  It is a hard thing to do, as as soon as the markets look like they are rebounding, we have some bad news and things drop even further than they currently are.  I feel pretty confident that though we are sure to have some drops, the general trend is positive.  However, you know your risk tolerance, your time horizon and what your gut tells you to do.  Me . . . . . I looking to get back in to certain stocks that appear real attractive right now - do your homework, maybe you can find some as well!

Obama making changes

Whether you voted for him or not, there is one thing for certain, President Obama is not letting any grass grow under his feet!  He has made a lot of new moved in the first two weeks of his presidency, some were expected others were hinted at, but he is getting surprising support for most things through congress.  There is still the Democrat vs. Republican thing we will have to all get through in order to make real change happen.  Currently, he is facing some disappointments for the first time with some appointments to various positions of people who have had some tax issues (like forgetting to pay!).   So far no one was caught in a dorm room with a bong, so that is good!

Job cuts continue with over 520,000 for the month on January.  With all the complaining about losing jobs in manufacturing, there is still job loss in the service sector, though it appears to be slowing in this sector, which is a good sign.  Still, the consumer fumes as we hear about another financial institution who took bailout money and paid out huge bonuses or other wasteful uses of badly needed funding.  Meredith Whitney an Oppenheimer & Co. analyst made a statement today that I say on Bloomberg.com where she mentions that people take Wall Street jobs for the pay, and if we cut or eliminate bonuses we are sending the wrong message and " . . . they're going to go somewhere else."  WHERE - do these people have a clue!?!?!?  This is called basic supply and demand, I don't know if Meredith fell asleep during this lecture in her economics class - probably as it appears only executives in the financial industry can't seem to understand this concept!  There is NO WHERE else for them to go!  SUPPY & DEMAND - let them get mad and take their toys somewhere else - who has the money to pay - NO ONE!

It is the financial executives, the top echelon brokers, etc. that helped get us in this mess with the large dollars.  President Obama is proposing a $500,000 limit on CEO compensation for these firms.  Shouldn't that be enough money - the argument could be, "well, they could make more in other industries, so we will lose them . . ." --- exactly WHO would we care about losing????  Who kept their company, stockholders and customers out of harms way during this mess???  Again, no one!  Please don't waste my time!

As for the markets themselves, not much happening in the way of direction.  We have a couple of days up and a couple of days down!  I still like consumer cyclicals, big pharma, certain technologies and any commodity plays.  I think it will take all year for this market to stabilize and get some direction that resembles UP!

Barack Obama is the President

Today, Barack Obama is sworn in a the 44th President of the Unites States.  Today, the White House created a blog that you can access - very cool!  

If we are looking at the effect of the new president on the markets - today is not the best day (4-6% fall off in the U.S. stock market, depending on the index one looks at).  It is unfair to look at this for anything other than the market has been falling for a while, and we are now back at lows not seen since November 20th (Dow under 8000).  This is going to take time - nothing will happen fast and there is a lot to do - it will take time to do it all, and have the impact show in the economy.

If you look at some company stock doing well early on, like McDonald's and Wal-Mart - what is their customer base?  This is value shopping at its finest. When you are worrying about your job or just lost a job, your focus, financially, is on food, shelter, clothing (remember Maslow's Hierarchy of Needs!).  At this point, it doesn't matter what a house costs, a car, or anything else that I don't HAVE to buy.  The first order of business is to do what can be done to stem the tide of job loss.  Once we make a dent on this you must see what jobs can be created - clearly looking in other places (other industries) will need to happen.

As for autos, I live in Michigan, and what is happening at the Detroit Auto Show this week is there is attendance, though not a lot of new things that are current (lots of concept vehicles that are a few years away from production, so no immediate help).  Crowd are decent, but not up (unemployed can't really afford $12 for admission), and there are some companies not present at all.  There has been some discussion between Cerebus and Fiat (Italy) about a joint venture (no cash included) that would give Fiat a 35% stake in Cerebus' Chrysler stake.  The idea is to bring Fiat's small car line to the United States again, and allow Cerebus to have access to that technology - while sharing info on the Jeep and minivan lines with Fiat.  I like this combo better than a sale to GM (which would clearly eliminate the Chrysler name plate from the planet).

We are just going to have to watch this story unfold.  We will survive, but it will not be fast.  I expect we need to survive until the end of 2009 to see any significant change and economic turnaround.

Happy New Year!

Here is the first post of the new year - did I miss anything???  2009 was sure a crazy year with any related to money and financing.  Scandals, bankruptcies, closures, layoffs, and many other things.  We also found out that the age old "diversification" does not work real well when everything goes in the dump!  We still have the Big 3, though for how long remains to be seen.  The markets seem to be waiting for January 20th and the swearing in of the new President to determine where things are headed.  

Banks are asking for more money, companies are still closing and laying off, retailers had a bad holiday season, now new job creation, those worried about their jobs are not spending!  Yuck!

After some early "up" days in all markets including international, there seems to be a slight downturn which began yesterday and continues as I write this.  Most markets in U.S., Asia and Europe are down (Nikkei was an exception).

The safe investment/savings play of Treasuries - good idea, but with these rates, the mattress is looking better all the time.

I am just looking myself right now, not a lot out there that appeals to me at the moment.  I think for the year I am going to look at biotechnology, pharma, technology (non-consumer), and energy.  We will see if I am right!

Year End!

This will be the last post of 2008 - a turbulent year for sure.  One wonders aloud what would be remembered from this year, especially in the world financial markets.  It would appear the number one story would have to be the real estate bubble and the financial market crisis.  We could argue over how, when, who, and why but the reality is we are neck deep in it and it will take a global effort to get us all out of it.

Consumer confidence it at some of the lowest levels ever.  Retailers are finding out real quick "that no Christmas is coming", as the final holiday sales are coming in - way down!  We should see a number of retailing bankruptcies in early 2009.  Malls are suffering along with individual retailers as shoppers are being more careful with the money they do have and are willing to spend.  Restaurants are also getting hit as more people can't afford (or chose not to) going out to eat, preferring to stay at home for meals.  This can help the grocery stores, but not the restaurants.

Commodity prices continue to be in the news as oil continues to hover just under $40 a barrel as global demand (or those who can afford it) declines.  Gold is around $870 an ounce while Silver maintains itself just under $11.

If you were not quite sure whether this was just the United States, looking at foreign financial news would set you straight.  This crisis is worldwide!  Unemployment is up in France.  The Nikkei 225 (Japan's version of a stock market index) was down 42% for the year.  Germany is suffering as well as others in Europe who would sell parts to China who would use it to produce products sold to the United States.  The United States is not buying - so China is not buying from Germany!  In Russia, they devalued the rubble!  This is a vicious cycle where everyone is waiting for the new administration to arrive on January 20th, in Washington, D.C.  Don't hold your breath!   There is a lot of work to do and I fear it is only going to get worse before it gets better!

Let's hope for a more prosperous 2009!