Stages of a Rally November 12, 2009
Posted by Andy Robinson in : Market Research , add a commentThe government may be able to keep the stock market party rolling a few months longer with more deficit spending and dollar destruction, but we’re clearly in the later stages of the amazing rally off of the March lows. I’ve found an interesting article that describes the typical stock market rebound after a crash, which they break into three stages. While one should always allocate a portion of money to stocks, I’d recommend over-weighting cash at the moment. I’ve long recommended owning precious metals and commodities as protection against government easy money policies, and would still encourage adding more on dips. When the Fed is forced to remove its stimulus due to deficit restrictions or accelerating inflation, we are likely going to sink back into recession again. If that happens, the stock market will plummet significantly since stocks are by no means cheap by any valuation method.
China’s Red Flag October 1, 2009
Posted by Andy Robinson in : Market Research , add a commentThe Chinese economy has exhibited increasing similarities to Obi-Wan Kenobi (help me Obi Wan Kenobi, you are my only hope) for getting the world out of this economic slump. This being the case, it bears paying attention to the Chinese stock market performance as a leading indicator of the strength of our own recovery. The Chinese market, which topped in August and is in the process of correcting, is at best an ominous warning that our party is nearly over. Read this yahoo finance article for some more data and charts.
No Panicking! January 23, 2008
Posted by Andy Robinson in : Market Research , add a commentNow is the time when normal investors get fleeced. Warren Buffet once said, “Be fearful when others are greedy and greedy only when others are fearful.” Unfortunately individual psychology tends to move along with the pack. When the stock market was skyrocketing in the 90’s, most investors didn’t have the willpower to trim tech positions and reallocate to bonds, cash and defensive equities. The same is true now. It takes willpower to not sell out of the stock market and to keeping adding new positions. The key to investing success is to have the right portfolio mix between different asset classes, which is determined by length of time until retirement and financial goals. I am young and completely in equities. Although this bear market is painful in the short term, I am confident that the stock market will soon find a bottom after a bit more volatility, and that the second half of the year will be marked by a strong rebound as soon as it becomes clear that the worst of the turmoil is behind us.
Investing for Income November 28, 2007
Posted by Andy Robinson in : Market Research , add a commentTraditionally one thinks of using bonds as an income source in retirement, but with yields on the 10 year Treasury note dipping under 4% recently and inflation still a strong concern, other options need to be found. One option that seemed great until six months ago is trading debt quality for higher yields. In an effort to beat treasury returns, financial institutions bundled together lower-quality mortgages and individuals bought high-yield bond funds. In this environment, we still need to shun low quality debt because it loses a lot of value in an economic downturn. I agree with this WSJ article that investors seeking income need to consider picking up value stocks. The recent pullback has given many companies, particularly financials, a much more attractive yield than treasuries. And over time, dividend-paying stocks offer protection against inflation because, as a company’s income rises, so generally does its dividend.
Commodities Rally Getting Tired November 6, 2007
Posted by Andy Robinson in : Market Research , 1 comment so farI think we’ll touch $100/ barrel oil, but simply because the traders are hyping that benchmark like it’s a foregone conclusion. Therefore money will chase crude until it reaches that mark then sell off steeply. But what does this mean for normal investors? Simply that now is not the time to load up on energy funds or commodities ETF’s. If you’ve owned them for long enough, take some of the gains off the table. I am still long-term very bullish on silver (the exchange traded fund has increased in value 33% since I recommended it August 23rd), but over the next 6 months it will give back some of its gains along with most other commodities. Gold in particular is near the end of its spectacular run.
Rally mode begins October 28, 2007
Posted by Andy Robinson in : Market Research , add a commentThe boys from Motley Fool have broken down the stats in their post Now is the Best Time of the Year to Invest. I tend to think that this year’s fourth quarter will stay true to form. We’ve rallied hard and given some of the gains back, so we will likely start the next leg up to new highs soon. The only thing that might throw a spanner in the works is if the Federal Reserve doesn’t kowtow to Wall Street and stands pat on the fed funds rate in it’s meeting on the 31st. I expect that they will cut rates a quarter or half percent which will probably start the rally of financials. I just bought some Bank of America before the closing bell on Friday at $48.03 because I expect them to rebound to about $55 or more by the end of the year.
Buffett interested in South Korea October 25, 2007
Posted by Andy Robinson in : Market Research , add a commentI’ve been leery of emerging markets and warning against the wisdom of owning countries like China since my June post. However, since then, emerging markets (particularly China) have continued to see strong stock market returns and would indicate that my warnings were unjustified. This is a situation, however, where I don’t think the rewards currently justify the risks. It is not always necessary to pay a huge price for terrific growth prospects. Warren Buffett is currently visiting South Korea and has expressed interest in their stocks because the valuations are about equivalent, and probably less, than domestic stocks. And this is with much higher growth prospects based on the dynamic economies in the region.
Will $90 oil kill the market? October 22, 2007
Posted by Andy Robinson in : Market Research , add a commentThe Yahoo Finance article $90 oil won’t kill the bull gives a good look at the differences between the US economy now and back in the late 70’s. In today’s dollars, the price during the 70’s crisis was around $75-80, which we’re well past now. But the biggest difference between then and now is that oil now has a much lower impact on our economy. People spend a much lower percentage of their income on oil, so it won’t take as large a bite out of consumer spending. Also, our economy is much more service and technology based than manufacturing, so it takes less oil to produce the same number of GDP dollars. But one big difference is that now no politicians (knock on wood) will be stupid enough to put in place price controls. When you put a ceiling on prices, it will always lead to supply shortfalls as market forces are not allowed to do their work by decreasing demand.
Where the market’s heading October 19, 2007
Posted by Andy Robinson in : Market Research , 1 comment so farPredicting the economic reality and the market direction is a hazy crystal ball indeed, but here is my opinion for what it’s worth. I cautioned of the possibility of a market top in my July 18th article and took a little cash off the table. We subsequently pulled back roughly 10%, after which I said (Aug 16th) that it was time to start deploying some of that cash. We have since rebounded quickly to the market highs.
Profiling Electronic Data Systems October 17, 2007
Posted by Andy Robinson in : Company Profile , add a commentI’m adding Electronic Data Systems to my list of stock picks today (ticker EDS). EDS is an Information Technology company (founded by Ross Perot) that offers both technology infrastructure services and applications to large multinational companies and government departments. They are nearing the end of a restructuring and cost-cutting period, and earnings should start to benefit soon from the cost-cutting and the investments they made to get into higher-margin niche business lines. This is a terrific value play and any investor with a couple year time horizon should be richly rewarded. Full disclosure, I don’t own any shares at this time. The intraday stock price at the time I’m recommending this company is $22.62.