Is a turnaround in the making?

After a whiplash week that saw the Dow plunging below July lows and analogies to the Great Depression flying on the airwaves and in the pages of the Wall Street Journal, Friday brought us nearly back to even.

The government’s actions to stabilize the markets, including talk of reviving a Resolution Trust Corp.-like agency that would buy and liquidate problem assets, had buyers out in force Thursday and Friday.

So here I am to join the cacaphony of voices that I keep criticizing, the ones who repeatedly ask, "Is it time to buy?"

If recent market action is any indication, I certainly have my doubts.

We did come back from some dismal depths this week, even though we ended up right back where we started.

Indeed, Thursday and Friday's rallies were impressive. Investor's Business Daily, however, was still advising to stay on the sidelines in cash.

I decided differently and took small positions in utility Southern Company (SO), generic drug maker Perrigo (PRGO), clothier Urban Outfitters (URBN), U.S. Bancorp (USB), and business consulting firm FTI Consulting (FCN).

We'll see how it goes.

Many experts see the current proposals on the table, which include the government assuming problem assets of banks for later liquidation and a temporary ban on short selling in the financials, as having more teeth than the myriad lifelines the government has been tossing out along the journey to this crisis.

The $85 billion loan to insurer AIG resulted in a resounding thud in the market. But Thursday and Friday's developments sent the Dow up more than 700 points over the course of two days.

Ken Heebner, who heads the CGM Focus Fund, which had the best performance among U.S. stock funds through June with a 17 percent return, applauded the government's tactics and balancing act through this crisis during an appearance on CNBC.

Again, we'll see how it goes.

More fuel for the bulls

There's been a lot written and said about the Chicago Board Option Exchange's volatility index, or VIX. It's an index that basically tracks market volatility by following what investors are willing to pay for options to offset market swings.

On Thursday, the VIX hit a level not seen since 2002 — prompting many to consider that a bottom had finally been reached in the market, according to a Wall Street Journal article Friday.

According to the article, industry watchers had been waiting for the VIX to jump above 35 or 40 before considering that a rebound was in the works. On Thursday, the indicator hit 42.16 at one point during the day.

Not everyone was convinced, however.

"You can't use history as your guide here," Steve Sosnick, an equity risk manager with Interactive Brokers' Timber Hill told the Journal. "We're dealing with stuff that no one has seen before. This market is like a minefield."

Brian

Some real stinkers in the market

It’s been tough for everyone on the stock-picking front lately. 

In the latest edition of Fortune, the magazine laid out its worst picks from its "The Best Stocks for 2008" issue published in December. The 10 stocks the magazine picked have posted an average return of minus 12 percent, versus minus 10 percent for the S&P 500. 

Topping the list of stinkers was Merrill Lynch (MER), which has dropped 55 percent since December. Dick’s Sporting Goods (DKS) has also dropped 40 percent in that time. Other losers thus far included: Berkshire Hathaway (B shares, BRK.B), down 20 percent; Annaly Capital Management (NLY), down 13 percent; and Jacobs Engineering (JEC), down 22 percent. 

The magazine did score with Florida real estate developer St. Joe (JOE), up 30 percent, and pharmaceutical firm Genentech (DNA), up 44 percent. And the magazine didn’t count out the others -- with the exception of Dick’s -- for a late-year comeback. 

Good news  still bears no fruit   

Investors' obsession of late had been the price of oil going up. Everyday the price of a barrel of crude went up, stocks typically went down. Well has anyone noticed where crude is now? On Friday, at one point it went below $100 a barrel for the first time since April. 

That's after hitting a peak of $147 in July. But the reaction's been less than enthusiastic, giving all the turmoil that still continues in the credit markets. Deals are being made and proposed and as of this writing, everyone awaits the fate of Lehman Brothers (LEH), which is poised to fail unless it finds a buyer or a savior. 

Bond guru Bill Gross of Pimco was preaching the gloom-and-doom of a "financial tsunami" in the works. That was, until his firm, which had invested heavily in the debt of Fannie Mae and Freddie Mac, netted $1.7 billion from the government takeover of the two mortgage agencies. 

After the bailout, Gross was on CNBC saying that the Fannie-Freddie bailout likely signaled a turnaround — a rosy view that a $1.7 billion payday would no doubt inspire (no shot at him; he's a smart guy). 

But hopefully he's right and the little guys get a chance here soon. 

Down but not out 

I realize I've been a broken record lately about how dismal things are, but I have not given up. Even though I pulled the plug on my positions, I still await signs of some sort of restored faith. There's been a lot of chatter about retailers coming back in favor soon. Jim Cramer of "Mad Money" thinks that if gas prices continue to go down, consumers may actually go shopping this Christmas. 

I think his thesis overlooks the thousands of people who are losing their jobs each month. Also, pump prices haven't been heading down like crude prices have. But hey, maybe he's right. If you agree, here are a few that Investor's Business Daily have been giving high marks based on sales and fundamentals: Urban Outfitters (URBN), Wal-Mart (WMT), Aeropostale (ARO) and Buckle (BKE). 

Happy hunting, but as always, proceed at your own risk.

Brian

Diary of a madman

When I first started writing this Taking Stock column/blog however long ago, it was intended to be a diary of sorts that would convey the average guy's attempts to beat the market, or at least stay ahead of the game. 

Well here's today's entry: I'm sick of it all. I'm sick of the question: "Do you see a bottom in sight?" Ditto: "Do you think we'll turn the corner soon?", "Is it too early to jump back into financials?", "What do you think the week's going to be like for stocks?" and "What do you make of this data?" I'll tell you what you can make of the data: Nothing. Because nothing makes sense. 

At midday last Tuesday the Dow rallied to 11,700. By midday Friday we were on the brink of breaking through the 11,000 floor again. I get whiplash watching it all. And of course, I followed the dumb herd and dumped what little I had "put to work" in the market before the selling subsided Friday afternoon. 

Already I'm questioning the move, and even though I promised my wife a stress-free weekend, I'm sure I will have internally beaten myself up by the time you read this. But was it the wrong move? Unemployment jumped to 6.1 percent last week, taking many by surprise. 

Some top economists have opined that even if the Fed cut rates again after their already aggressive loosening campaign, it would do little to improve the current economic picture. Apple (AAPL) is getting ready to unveil some super-duper, nifty, secret gadget on Tuesday. 

But how many of the thousands of people losing their jobs each month will want to, or be able to, pony up the money for it? I've just become incredibly frustrated of late and figure it's bet to sit tight until some type of clear signal emerges — if indeed it ever does. 

So as I write this entry on a Friday afternoon, I look forward to a relaxing weekend, free of any thought about the market or what it might be doing come this week. I won't be bothered by that nagging thought: "Should I have stayed in?", or even "Do you think we'll turn the corner soon?" 

Yeah right, who am I kidding?

Brian

GDP surprise give markets a boost

The main business headline Thursday was a revision to Gross Domestic Product projections that showed the U.S. economy grew faster than earlier thought during the second quarter. That news sent the Dow marching upward by more than 200 points. But as we've learned in recent months, good news is only as good as the next bit of bad news, and that came Friday when new data on consumer spending and personal wealth helped sour the mood again. Personal income fell .7 percent in July, the biggest drop in three years, according to the U.S. Department of Commerce. Consumer spending also dropped .4 percent, the lowest since 2004. There has been a lot of concern lately about how much longer the country's consumer base can keep doing its thing as layoffs continue, the job market remains weak and more and more people increasingly resort to their credit cards for necessities, rather than the gadgets and toys they used to charge. Once you max out your Visa or MasterCard on groceries, then what? That concern was evident Friday in the resulting triple-digit decline in the Dow that took back more than half of the previous day's gains (and for whatever reason, MarketWatch continued to carry the headline "Blue chips rein in day's loss" as the Dow's losses actually accelerated to close down 170 points). Some investors are putting much stock (the faith kind) into multinationals for their ability to sell goods abroad, even while the economy at home languishes. A great example of this is Coca-Cola (KO), which got a lot of exposure during coverage of the Olympics in China, where it is trying to grow its brand. But there have lately been signs of slowdowns abroad that put that theory in question. My confession: I'm really getting burned out an all of this. Watching the daily see-saw between stocks and oil, being told this piece of data is a game-changer only to be told just the opposite the next day and the incessant rants of pundits who profess to possess some type of crystal ball, have all served to drive me to the brink of insanity. Take for instance this comment from Doug Kass, a guy I read frequently enough on TheStreet.com: "The key factors that I feel will influence the course of the market for the balance of the year clearly include politics, credit markets, housing, interest rates, crude oil and other measures of inflation, corporate profits and geopolitical events." Wow. That's what I call hedging your prognostications. The only thing he left out was killer bees. My returns lately have been slightly negative. I ditched the short real estate and financials ETFs I recently entered. I remain in DIA, XLF, MDY and SPY.