Folks,
I have posted a list of books and articles I recommend for you to read. Check it out!
As for today, it was a another rough one. The market started off strong but once again wilted and took a dive in the last hour of trading. Officially, the Dow fell below 9,000 (8,579…-7.3%) and the S&P tanked to 909 (-7.6%). Iceland halted trading, US Fed may take ownership stakes in banks, unemployment still low, retailers providing more and more discounts and it’s not even Christmas yet, Europe and Asia are down more than the US, and Germany now realizes that the subprime mess was not just a US thing. Can the market go lower? Of course it can as consumer confidence and investor sentiment continues to plunge south. Also, the volatility index (VIX) struck new highs today. In simplistic terms, the VIX is a measure of fear. More specifically, the VIX measures the premiums investors are willing to pay for option contracts. When the market is falling and fear is high, investors are willing to pay more to purchase protective put options. When the market is rallying and investors are complacent, they’re not willing to spend so much.
With regards to Iceland, its authorities decided to seize Kaupthing Bank, the largest lender in the country. This move follows the prior takeovers of Landsbanki Islands and Glitnir Bank. The latest addition means that the government is in control of the top three lenders in the country. The problem here, though, is that the Icelandic government itself may not be able to handle all of this and is in talks with Russia for a 4.0 billion euro loan.
Update on some recommended stocks:
- GLD was up about 18 tonnes yesterday (around 600,000 ounces), and SLV was down about 1.4 million ounces in terms of holdings. Today, both ended up higher. However, GLD made a late push to positive in the last half hour of trading. GLD was up 0.48 points (0.54%) and SLV was up 0.44 (3.82%).
- As for Wal-Mart (WMT), I think we need it to step up to the plate. This globally dominant retailer is the epitome of fiscal prudence and has always wanted to bank and now may be its chance. Imagine if the nation’s largest company made a move to acquire a bank. That would be controversial as heck but wouldn’t it be exciting? The company has failed in its applications in several states over the past few years but the plus is that he FDIC is pressed for cash and people are desperate. Who knows…this is just me and my interest in oddball events, like Wall Street all but disappearing, China owning more and more of the US, our economy becoming more and more socialist in times of turbulence, etc. With regards to share price, it got hammered today…down 5.8% to 51.39. However, they are holding tight to their previous forecast and are experiencing positive growth in same store sales. Earnings release is expected to be on 11/13/08.
Hank Paulson is gathering the G20, to address the global economic crisis. I think this is a good idea as it allows for everyone to get on the same page. The Dow Jones Industrial Average is off by 34% but many of the overseas markets (India Sensex off 46%, Russia RTS off 67%, Brazil Bovespa off 34%, and Nikkei off 39% to name a few) are down a lot more. So, we definitely need each other.
One thing I am fuming about is that the NY Fed is loaning 37.8 billion to AIG. This is on top of the US Fed issued $85 billion loan facility! This is in spite of the publicized spa visit by AIG executives where they spent $400,000 on a spa junket after receiving fed funds. This is nuts as each one of them should be fired and forced to reimburse the $400,000. At some point, government has to just step aside and let some firms fail. Are there any more levers that the government has left to pull? Everything they have tried has resulted in further downward action on the markets, domestic and internationally.
The silver lining to this bear market is that those of you with cash on the sidelines should start making your Christmas list of stocks to own because the P/Es are coming down fast. There are a lot of bargains right now but, as I said in earlier posts, wait for the volatility to subside or start buying in small lots until a bottom has been established. The bargains I am referring to are the global brand leaders such as the Cokes, Wal-Marts, Starbucks, and the like. For those that didn’t conserve cash, they were unfortunately part of the $2 trillion that got wiped out in pension and retirement accounts.
Articles to read:
- Here is a story that is entitled “Financial Crisis: Who will bail out the Euro?” Definitely read it from start to finish.
- The second article is from John Hathaway at Tocqueville Asset Management. He examines whether gold is still in a bull market and concludes that this week’s move upward is for real because other supposed safe havens for capital, such as US government bonds, are failing as we speak. That should leave gold standing alone with $1,000 per ounce acting as a new floor. The link to his preamble and then to the article itself…is here.
- Here is an informative overview of 10 things to do in a market meltdown. It’s definitely not too late to act.
We should all be patient, conserve and build up our cash reserves, pay off pending debts, enjoy the run up in precious metals, and then when the time is right…pounce on the bargains! I will let you know when I do so.
As always, if you have some ideas to share or comments to make, feel free to reply to this post or e-mail me at moolahtimeletter@gmail.com. Also, I am out of town tomorrow, so I may not be able to post a new blog.
ciao,
Moolah
