Today the Dow had it biggest point gain ever. That would be a marvelous thing for investors, had it not been at historic lows before the spike. Plain fact is, the rise today represents a pitance to the amount most investors have already lost in this market.

Which brings up the question of have we hit bottom in the market? Sometimes, it is nice to be wrong, but I don't think so. It is most likely, just a bear market rally, and it won't last.

Why? Because the fundamentals have not changed. Housing is still falling off a cliff, banks are still struggling, and the economy is in dire shape. Add that there was no catalyst for this rebound, and the only conclusion you can come to is it won't last.

So, what happened, and why?

The answer is much the same as it has been. Struggling financial institutions. They had gotten about as much as they could from the market before. Not totally, but close enough to cause them to panic. To get more, they need a market rebound, so they can do it again. Keep- in mind, they are not fools. When the Dow was 8300, the next support level was 7800. There simply was not much room to maneuver. Solution, a short term rally.

Incidently, this is the first of three rallies, before money will start returning to the markets en-masse. Most private investors are still keeping a lot of cash on the sidelines. And, it is this money on the sidelines that will be the cause of the markets returning to normal functioning.

Now, there is a catalyst at work that could make this rally hold, at least some of the gains. That catalyst is earnings season. It may not be as bad as predicted by many analysts. Still, I would have to bet on a 500 point drop before the week ends.

In the mean time, I tend to think the investment houses, and fund managers just threw the dog a bone. Good doggy. If they had a heart, it would make them feel good about themselves.
But, that is not the case either. These same managers are paid for performance, and that has been pretty dismal this year so far.

Well, what is the bottom then? 8350 was close. Keep in mind it was more than five years ago when the 7800 support level was created. There has been some market value added since then.

I wish I could be more optimistic about all of this, but without any catalyst to push the market upwards, my only conclusion is that it can't last.

Still, the market did get a nice bone today, and the dog is grateful.

Comments: View Comments |  Monday October 13, 2008

Another big drop in the market today. Caused largely by the court jesters (Congress). But, to be fair to them, it would have happened anyway.

But, probably the best sign the market is near bottom, is the widespread panic about stock prices, and the market as a whole.

Then again, from here there are only two choices. First, is the total demise of the market altogether. That is highly unlikely, as I have to believe Wall Street is smart enough to simply stop ALL trades before that could happen. Still I do not think we are too far from that happening. I do not think anyone will allow the Dow to fall to 8000, before the markets close doors for a period of what could be months. The more realistic possibility, is that stocks will begin a small rebound. I do mean SMALL.

There is already too much bad news built into the market/stock prices already, so the coming earnings season is not going to do anything but prove the world is not coming to an end. Oh sure, I expect a lot of earnings misses, and I suspect retail is going to be hit hard, not only in this quarter, but the next two. People are in bad shape, and spending is going to suffer.

But, the bulk of businesses should have something positive to say about what they see on the horizon. Yes, I expect some inventories to be building. Not really a bad thing, just profits yet unrealized. Costs are being absorbed right now by most goods producers. Production is slowing, but not stopped. Many companies have several years worth of backordered sales, and these companies will be showing profits. New orders may be slowing, as businesses will be reluctant to finance, but if products have long lead times, orders will still come in. They have to, to protect the long term viability of the companies.

I expect good things from most oil drillers in this earnings season, as most rigs have been contracted for years into the future. Some companies that hedged well into the future may see some problems, as prices may be falling (to keep demand strong), and falling prices will cut into profits. But the comanies that hedge will also be reaping profits, as they will be getting resources at lower prices too. It depends on which side of the supply/demand curve your company is on if this will be a good market for a company or not. There will be winners, and there will be losers.

But, my point here, is there will be some winners. And, some will be enough to put an end to the terror striking the market right now. The most likely scenario I see, is that there will be a return to looking for individual stock winners, rather than the continual pounding of the market as a whole.

Banks and financial institutions will continue to divest, which will keep the heat on selling pressure. They will because they have to shore up balance sheets, still covering losses from the housing crisis. There will be few new loans, and more loans already made will be failing, as the economy as whole begins to fail.

But, the bright spot in all of this is that money on the sidelines will begin to return to the markets. The bulk of the carnage is over! The markets have done their thing already. Well, to be very fair, there will be one more big dip, but there should be a mild recovery before that happens.
And when exactly will this dip occur, and why? The US elections will be the cause, and no matter who wins, the market will tank (as changes will be occuring, and the market frowns on change). It will be worse if Obama wins in my opinion, and I expect it around February.

But,today, the market over-reacted, and I expect to see some upward bounce in the market. I look to see the Dow around 10500 by the end of the year.

Some of you are braver than me, but I would coninue to avoid anything remotely related to financials right now. I like them, but that is not where I would put money. I would still look for two things as I pick stocks right now. Well, three, but the first goes without saying. Never invest in a company unless it is sound, being in a good market segment, with a good balance sheet, and a promising chart, and P/E. Second, is continue to look for good dividends, and third is invest in companies that have long delivery timelines.

Companies that need large capital for investments, will be doing little growth. Shipping comes to mind, The cost of ships will make new orders hard to come by. Yet,dry bulk shippers using existing ships should continue to weather the finacial storm fairly well. At some point though, they will have increased dry dock expenses.

Incredibly enough in all of this, the dollar is strengthening. As the dollar strengthens, so will gold, silver, and other precious metals. This will make some mining stocks very attractive.

And the last thing I want to mention is that companies have not let the deteroration of stock prices go unnoticed. I expect many to be looking for creative ways to increase values to shareholders. This could be in large stock buybacks, one time dividends, and for a few maybe even stock splits. I even expect some renewed interest in mergers and acquistions to start early next year, in sectors outside of financials, and not because they are distressed, but because they are of investment quality.

But, one way or another, the market panic shown today, will end, and soon.

Comments: View Comments |  Monday October 6, 2008

In times of rough markets, any stock is a gamble. When your stock is in a sector that is just being creamed, that just increases the gamble. But, by the numbers, Mosiac is due to rebound nicely.

First, let's examine the market it is in. It is a producer of agricultural products, namely potash and phosphates, used for fetilizers and animal food products. At least that is the bulk of what it does.

Since people and animals have to eat, it would seem the business will provide needed products, even in a financial downturn. Let's hope so, or a lot of us will be going hungry.

Mosaic is down significantly this year. It stock price has quartered since reaching it's 52 week high just a few months ago. It is now bouncing along a 52 week low. Since it is a sound business, that does put near the buy.

Since it is a sound company in a vital market segment, why not a buy right now? Simple. The markets will go yet lower. The global financial turmoil can do nothing else but cause more market drop.

It's major competititor is Potash. Another good company. It too is taking a beating right now. Both companies have sound profit margins (20+%), so about the only reason for the beating the stocks are taking is the global selloff of stocks in general. I think they should survive the demand destruction better than many sectors.

Look to buy with the Dow around 10,200. That may not be the bottom for the Dow by any means, but it will get you a hard to beat price you can be happy with.

The P/E is ridiculously low, under 3. I would like to see a better dividend, and have not ruled that out in the future, as many companies may be increasing dividends to maintain shareholder value. An improved divided may be a couple of years off yet though, as liquidity is going to be foremost on the mind of companies for many years to come.

Normally, I like company charts, and what I see in the charts would scare off the bravest of investors. The chart on Mosaic is not really worse than most others right now, but the spiral down has been more obvious than for many other companies.

What is safer than Mosaic? I still like Terra Nitrogen (TNH). Still in the ag fertilzer market, but the dividend on TNH makes it a superior buy in this kind of a market.

Things on the horizon for POT, MOS, and TNH? I think they will learn from this devaluation of their stocks, and rather than have stocks in the $150-200 per share range, when they get close to those, they will have stock splits. While they have no real effect on the stock value, it does give the opportunity to have more shares at work, even if you do divest a few shares over time.
As long as the company maintains a good profit, that can only be a good thing.

Mosiac is a wait right now. Mostly, for the other shoe to drop in the Dow, not because it is a bad company. It is a good gamble though, even if you feel compelled to jump in before the bottom, I don't think you will suffer too badly.

Comments: View Comments |  Friday October 3, 2008

People, I am an OPTIMIST, but this is getting UGLY.

Yes, I am DEEPLY worried.

Let's face some facts. When things get BAD, almost all markets will print money. EVERY government on the planet will. Because they have to.

Thinking about a market? It will depend on the country you live in. Because most global trade will stop.

Why? Because of the devaluation of every monetary item we have. And, it will NOT be about money any more.

It will be about the HAVES, and the HAVE NOTS.

Yes, we have bartered away many of the resources the US has, in the name of GLOBAL peace.
The Arabs robbed us for it, and we rolled over and begged for more. The Chinese and Indians, are begging for our resources, as they live in an otherwise desolate wilderness.

This is NOT about MONEY people. The sooner you see that the better you will be.

This is the preparation for a GLOBAL WAR.

When monetary systems collapse, each governent will print money. It WILL devalue. In fact, to the point, there may not be a market at all. At least not like we know it today. Each country will have it's own market, because it's money is so devalued, no other country will invest in it.

Then what do we do with the "surplus people", we have created by all of this suffering?

We have a WAR!

It is good for economies.

I have NO faith in our court jesters, but I do believe they are smart enough to not only see this,,,,, but to PLAN IT,,, or at the very least,,, blunder us into it..

Money? Our stock market? Taxes?

The MEDIA, has blinded us all.

So, I IMPLORE YOU, before this is too late. Let's stop this carnage. NOW!

There are NO winners. The US has technology, resources, and more. I have a hunch, this is ONE, the US can't do. It is just TOO big, and means to much to the rest of the world.

Worried about your financial security?

If you have kids, you likely just lost them. If you have money, well, that may be gone too. Who wins in a war of HAVES, and HAVE NOTS? There are no HAVES, in that kind of a war.

Oh, I have scrupals, and will survive.

Folks, I am religous too, but not fanatically. But in almost every religion I have studied, I have found one passage reigns supreme.

It is harder for a rich man to get to heaven, than for a camel to get through the eye of a needle.

We have few camels in the US. Wonder why that analogy?

Markets? People the sky has not fallen yet, and there is hope. Yes, I am an OPTIMIST.

I give it three years, maybe five.

God is my witness, I hope I am wrong.

Comments: View Comments |  Thursday October 2, 2008