The gaping black hole that's been this market since November continues, and today's (November 19, 2008) big sell-off is no exception. In fact, we've been delving down into this black hole since June, and despite the best efforts of central banks around the globe to stem the decline, the deluge isn't over yet.
Right now, we are staring down the barrel of 800 on the S&P 500, and if we fall below that psychologically and technically significant barrier -- look out below.
As I looked at my trading screen today I saw a lot of green. Green screens, of course, that indicate a market that's finally starting to trade higher.
To this I say -- it's about time.
After so many down days during the past few weeks, the welcome relief of green screens indicates that not all is lost on Wall Street. The sector showing one of the biggest spikes higher today is financials, which is particularly encouraging after a few weeks of difficult headlines about bank failures and the pending demise of lenders Fannie Mae and Freddie Mac.
There's no denying that April 2008 was a really good month for the equity markets. To that I say -- it's about time!
After the worst first quarter in recent memory, stocks finally showed everyone that the bears hadn't taken up permanent residence on Wall Street. Now in the wake of the admittedly very good performance we witnessed in April, many pundits have taken to asking if the credit and equity market crisis is now over.
In my opinion, the answer to this question is a definite no.
This morning (April 23, 2008), the newspaper Investor's Business Daily interviewed me for an upcoming article about how a lot of companies are likely to start cutting their dividends.
In my opinion, we are at the beginning of a new wave of dividend cuts, especially from traditional dividend-paying sectors such as banks and other financial institutions. I really am bearish on banks right now, and for that matter any company that makes a living by loaning money.
By now I suspect that most of you are intimately acquainted with the bailout of Bear Stearns (BSC) by the Federal Reserve and rival bank JP Morgan Chase & Co. (JPM). That's why I am not going to rehash the details of this fiasco here. Rather, I think the details of the bank's demise are far-less important than the lessons to be learned by you, the individual investor.
What are those lessons? Well, I'm glad that you asked.
The commodity boom certainly is enticing aggressive investors. In last week's ETF Talk, we discussed commodity exchange-traded funds (ETFs) that tracked an individual commodity, such as gold, silver or oil. These ETFs in recent months have outperformed the market to generate positive returns.
I know this won't come as much of a surprise to some readers, but the media has once again missed the boat.
This past Sunday, the Los Angeles Times ran a cover story in the business section about buying a used car. What?
Nowhere in the entire business section was there any article on the troubles in the financial markets. What a waste of newsprint! No wonder newspaper circulation is down.
Right now, we are suffering through one of the biggest economic storms we've had in decades, and all the Times can do is give you tips on how to kick the tires on that used coupe.
There is no denying that stocks are back on the move, and during the past several days the equity markets have rallied in the face of some really bad news.
What kind of bad news? Well, the latest Producer Price Index number was up 1% in January. This is the highest monthly rise in the index in 26 years. Then, we got a report that housing prices nationwide fell nearly 9% in the fourth quarter of 2007.
As if those setbacks weren't enough bad news, we witnessed a slide on Tuesday (2/26/08) in the consumer confidence numbers, which fell to their lowest levels since February 2003.
The major market averages have, to a great extent, managed to keep a stiff upper lip in the face of record-high crude oil prices and the continuing peril in the financial sector.
I think this market's resilience is truly remarkable, especially when you consider that so many of the stocks in the financial sector have been trounced by the latest bout of subprime flu.