This morning we witnessed a continued sell off but the bulls are fighting as the Dow did, for a short time, make it into the green. The market is definitely in process of trying to establish a floor. If we wait till the economy is churning again in full speed, GDP is up, and the dollar is strong on a fundamental basis, we will have missed the boat on the next bull market. As I have said before, with every dip, I am buying small lots of shares of the best of the best companies. I have no doubt that, 2 to 3 years from now, these stocks will be higher than they are now. We want to focus our efforts on companies with low levels of debt, high cash balances, a history of providing dividends, strong balance sheets, and solid earnings despite the downturn in the general economy. The list that I have provided in previous posts fits this bill.
All of the market pundits claim that what we are seeing in the markets is completely unprecedented. I say, “No way Jose!” This is simply the inverse of what we saw during the tech boom. Back then, it was all about the companies with little to no earnings, future cash flow projections, and loads of debt that were skyrocketing. Now, we are seeing companies with strong earnings, strong fundamentals, and low levels of debt relative to cash on hand that are trading at historically very low multiples and many of these companies are below $10/share.
Also, regarding the supposed “big 3″ auto companies, did you realize that their CEOs flew down to Capitol Hill on private jets. Are you kidding me, and they are asking for a bailout! How about we start with them selling their private jets and flying like the rest of us? These guys are still delusional and feel they have done no wrong. Of course they must be right….what in the heck could be wrong with driving the pride of American manufacturing completely into the ground? For all intensive purposes, both GM and Ford are $0 stocks as they don’t produce enough cash to service their debt for even 1 year.
I am sure I must be sounding like a broken record in telling you that jobless claims continue to hit new highs and will probably continue to through middle of 2009. For the week ended November 15, jobless claims totaled 542,000, which is higher by 27,000 from the prior week. The consensus estimate had called for 505,000.
As for investing in other than blue chips, once the Fed stops printing money and fundamentals resume globally, I expect silver to way outperform gold due to the level of unnecessary beating that silver has taken in recent weeks. It wasn’t too long ago that it was trading at $18 and now it is below $9. Today, I am buying some more SLV and SSRI…albeit in small lots. Now, is not the time to go all in. There is still too much volatility and further downside potential in the global markets.
Here are some very interesting articles for you:
- I highly recommend this article. A good friend of mine forwarded it to me yesterday. It discusses the end of Wall Street and how it came about. The author is Michael Lewis who wrote Liar’s Poker. If you haven’t read Liar’s Poker, which chronicles the excess on Wall Street, I recommend you do so as it has turned out to be quite a prophecy.
- Here is a cartoon which describes the average American lifestyle being sustained on debt. Hopefully, we all learn from the current financial and economic crisis to live below our means and actually save.
- Moolah
