Things You Can Buy For $2

The markets got hammered at the opening on the news that JP Morgan had bought Bear Stearns, they are off their lows for the moment but  the DJI hit a low of 11756 and the futures hit 11671 before rebounding, Gold hit a record of $1030 an ounce but is currently trading at $1006. People are running for the Hills. it will be interesting to see what comes out this week with the FOMC statement on the 18th.Already the Fed has cut the lending rate for institutions from 3.5% to 3.25%. This increases the likelihood of another large cut  at the next Fed  meeting there is some talk of a full 1%-that to me really smacks of panic .It is also reported in the UK Sunday Telegraph that Goldman Sachs  will report a $3 billion write down when they report on Tuesday, so it seems even the previously untouchable Goldman have got their fingers burnt as well. Unfortunately I think there is a way to go with this before we see the bottom, but only time will tell.

 

Precious Metals and Commodities, it is becoming a mantra but there is nowhere else(apart from Cash) that looks likely to be reasonable in the next 12-18mths until the stock market has dealt with all the issues and found a bottom.

 

On a slightly lighter note I found this article   on another blog, and found it amusing but also very telling about the state of the Financial Institutions, it is  worth noting that not that long ago Bebo the social networking site was sold for $850 million -more than 3 times what Bear Stearns was deemed to be worth. Interestingly the Fed has also underwritten the purchase of Bear Stearns, so similarly to the debacle in the UK of Northern Rock it is the American Taxpayers that are in hock for the approx. $30billion of "Toxic Waste "  that has caused the decline of Bear Stearns, when you consider back in September Bear Stearns was trading for around $100 that is one hell of a discount .

 

 

 

 Things You Can Buy For $2

Things you can buy for $2:

• 2 limes
• 1 organic avocado
• 15% of a drink at a bar
• A pound (sterling)
• A day’s worth of labour from a farmer in the Indian countryside
• Nothing at a strip club
• A payoff of that persistent newspaper boy who wants his $2
• 2.3 cheeseburgers from McDonald’s
• Medicine for an African child for a whole month
• Oh yeah and these guys….

Amazing Bear Stearns (NYSE: BSC) Fact: Their building is worth 3x more than what their equity was sold for.

Best Wishes

 

Alan

 

Technorati Tags: Bear Stearnsearns,FED,JP Morgan,Rate Cut,Northern Rock,FOMC,DJI,Goldman Sachs

Stocks decline after record Rise yesterday-Gold moving towards $1000

As I mentioned in my earlier post, I really don't feel that yesterdays rise was anything other than a massage upwards based on the Fed's announcement of a $200 Billion injection to improve liquidity.Today after rising at the open we worked our way back to end up with declines across the board.

The Dow Jones industrial average (INDU) lost 0.4%, the broader Standard & Poor's 500 (SPX) index lost 0.9% and the Nasdaq composite (COMP) lost 0.5%.

 

The announcement of the injection of capital from the Fed sparked a short covering rally but today we returned to concerns about what the economy is doing .The Retail Sales numbers are due out on Thursday and they will be closely watched to see what consumers are doing, if we see further declines in retails sales then it will likely spark another moving lower of the indices.

 

Oil hit an all time high above $110 a barrel before closing just below that, I can well remember the raised eyebrows when Goldman Sachs forecast $100 by 2009 in July 2007. looks like they were dead wrong and we got there a lot sooner !!

 

For me Commodities are still the place to be at least in the medium term, sure we will see pullbacks, some of them vicious but I do not see them being a bad investment over a 2-3 yr horizon.Gold was up again at $985 and I don't think it will take much for us to see $1000 in the next couple of weeks.

 

Best Wishes

 

 

Alan

 

 

Technorati Tags: $100 Oil,$1000 Gold,Gold,Fed,INDU,SPX,COMP,Nasdaq,Trading

Is the worst over ?-Should we Start Buying Stocks again ?

Yesterday there was a huge rally in the stock markets, Look at the 5 minute Intraday chart below:

 

 

The markets continued higher at the outset today but with little conviction and already at the time of writing, the DJI is 100 points off its high. My own view is that we are seeing bounces inspired by well orchestrated news releases and manipulation by the Fed and others to stop the  markets plunging.I am sure a lot of you have heard or read about the PPT(Plunge Protection Team) Plunge Protection Team  who's role is to try to stop catastrophic drops in the market by intervening when appropriate.A lot of people feel that there role has now morphed and they are intervening far more often in the markets to maintain the perception of a strong economy and a bull market.  There has been a number of press articles lately indicating that they are back in the markets Bush convenes Plunge Protection Team. I think we will see them being increasingly less and less effective as time goes on and people realise that there is no real substance to these rallies only manipulation. For myself I am sticking to Precious metals and Commodities as I have been advocating of late. I do not think we are out of the woods yet and there are definitely still a few hungry bears roaming around in the Bushes.

 

What are your views, should we be buying stocks again, is the PPT a good thing or is it getting in the road of market forces.

 

 

Best Wishes

 

Alan

Technorati Tags: PPT,Plunge Protection team,Stocks,Dow Jones,Commodities,Gold

Lightening up on Some positions-Think there is increased possibility of Downside

Firstly apologies that I have not been able to post for a week or so I had some computer problems and I was travelling so was not able to get any posts out.Well yesterday was a real shake out.Today there seems to be some buying on weakness, I am glad I bought some SPY Puts a little while back as they softened some of the downside-I still was down around 3.5 % yesterday though.

I am not convinced we have seen the last of the selling and yesterday was a timely reminder of what can happen when everyone rushes for the exits at once.I am waiting to see where the Market closes and also what the voulume is like today, if we are up but volume is weak then I think we are in for some more selling sooner rather than later.

Some selling was long overdue, it would have been nice if it had not all happened at once though !! I took the opportunity to lighten up on some positions today so that I have some cash to take advantage of any opportunties but also to take profits or to reduce my exposure to some of the more High Beta stocks which will move a lot if the market sells off again.

I sold the following from my Pension Portfolio and My ISA

Linear Technology- LLTC sold for an annualised 6.38% Loss

Realty Ome Exchange -O sold for an annualised 24% Gain

Level 3 Comms LVLT-Sold for an annualised 26.5% Gain.

I would be extremely cautious about adding any positions at the moment I think we need to take some time to see what transpires in the next couple of weeks before we decide our next moves.

Sometimes the smart trade is to do nothing !!

For those of you old enough to remember the TV series Hill Street Blues -

" Lets be careful out there "

Best Wishes

Alan

Tags: LLTC, LVLT, O, Level Three, Realty, Stock Market Decline, SPY, PUTS

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