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The Carnage On Wallstreet Continues
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Well July is upon us and we have celebrated Independence Day. I do not think we will have much more to celebrate in the coming months. The stock market has reached "official" bear territory and a new earnings season begins tomorrow. Oil is hitting new records each week. The credit leverage of the banks continues to unwind. Prices are rising all around us to compensate for the increases in fuel prices. Property continues to go down in value. The builders are on the ropes. The airline industry is in trouble. The banking industry is in trouble. The automobile industry is in trouble with talks of a possbile General Motors bankruptcy (something that I have not heard in my lifetime). The corn crop is seriously damaged by the mid-west floods and food prices are spiralling upward. The unemployment rate is increasing. One would be hard pressed to find any good economic news today. So what are we to do other than to wring our hands. The safest place to be at the present seems to be in cash. The next choice would be value stocks of companies with little or no debt. In the near future companies are going to go belly up simply because they cannot find financing for their debt. The problem is that the banks either won't have the money or they won't want to lend it if they do. So, companies that have little or no debt who pay a dividend and whose price is already beat down by the last few weeks of market attrition are the best bets. Add into that companies who cannot be held ransomed by increasing oil prices. I have most of my money that I have in the market parked in utility stocks. With depressed prices some of them are paying almost 7% return on the dividend. So as long as it looks likely that they can continue to pay the dividend, this might be a good place to park your money until the carnage on Wallstreet is over. Cash is really the only safe option. The good news, you can look for better interest rates in the coming months due to greater competition for the decreasing amount of money in the lending pool. Interest rates will go up regardless of what the Fed does.
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