Where is this economy going?

I caught Wilbur Ross on CNBC a week or so ago and got a kick out of the way the noted investor phrased the matter of what it is, exactly, we’re going to make in this country to grow our economy and climb out of the hole we’re in.

"We can’t just flip hamburgers, sue people and trade stocks," said Ross, chairman and CEO of W.L. Ross & Co.

True that.

With the big three automakers in the tank and the housing market on hold indefinitely, Ross made a good point.

President-elect Barack Obama has pledged a new New Deal program that would pump billions into the building of infrastructure and roads, employing thousands along the way.

But for how long?

How many more iPhones, flat-screens and video games can the world buy and still keep the world economies afloat?

Ross’s response came in defense of his remark that a sagging dollar had recently held promise of lifting U.S. exports.

Squawk Box host Carl Quintanilla tried to make the point that we shouldn’t care too much about manufacturing because we don’t have much of it.

Ross suggested we’d better start getting some.

Some think green will be the answer.

They maintain that a bustling economy built on dismantling our dirty industries and making energy from sources like wind and solar power will put people back to work and make for a healthier planet.

Of course, there’s the alternative solution as laid out in a Wall Street Journal editorial last week: Spend like a madman on defense.

So there you have it. The problem is solved. We can either clean up the planet or blow it up.

Either one, it seems, will get this economy rolling again.

Stock watch

I’m about as interested in buying stock at this point as I am banging my head repeatedly into a brick wall.

But I am watching, keeping my eyes open for when the market does pick back up and it seems safe to tread back in.

One of the stocks I’ve been watching is Dryships (DRYS).

I’ve written about it before, back in the good old days when the market, overall, was moving in the opposite direction that it has lately.

Dryships was a high-flyer, and the shipping stock had hit a high of $116 a share back in the spring before breaking out the life rafts and coming to a rest on the sea bottom of $3 a share.

Quite a plunge, indeed.

But the stock has shown signs of recovery lately.

Dryships recently edged up into the $11 or $12 range before pulling back to around $9.

But a lot of buying volume came into the stock this month. Shipping stocks were holding steady on belief that countries like China would relying on cargo-haulers to feed their fast-growing economies.

Then came news of a global slowdown and the shippers lost the wind in their sails and got a few holes in their hulls as well.

Earlier this month, the Wall Street Journal ran a piece titled, "Charting a New Course? Shippers May Rebound."

The article quoted Ryan Detrick, a technical analyst (stock chart reader) with Schaeffer’s Investment Research, who noted the increasing buying on volume in shipping stocks.

"On a longer-term point of view, that’s a potential capitulation sign which suggests someone could bottom-fish and really be rewarded," Detrick said.

Brian

My new trading strategy: Boring old CD

So I shut down my trading account Friday and went shopping for a CD.

I decided I couldn’t afford to pay fees anymore on the managed account when I wasn’t making any money in it.

To date, I’ve lost about 10 percent on my trading account, including taxes and fees. That’s a lot better than other folks out there, particularly some professional fund managers who have lost 40 percent or more.

But it’s still disappointing and discouraging to me.

The only reason I didn’t lose more is because I stayed out of the market more than I stayed in it this year.

I hear many people say that they just don’t look at their portfolios during times like these, opting instead to "stay the course" and wait for better market conditions to return.

For me though, too many stocks have fallen too far for me to stick around and have "faith."

Murphy’s Law probably dictates that this week will mark the definitive "bottom" and stocks will go soaring off into the atmosphere. I’ll probably be kicking myself and thinking: "If I had just waited one more week!"

Then again, the opposite might happen, and the market might continue to go lower.

No, for right now, I’d rather be safe than sorry.
I’d rather regret gains lost out on, than losses gained.

My search for a CD was a bit frustrating though. Yields are mostly pitiful.

My financial adviser actually suggested I go shop around somewhere, rather than accept the only poor yields she could offer. After surfing around on the Web, I managed to find a deal from MetLife Bank for a 4.15 percent yield on 1-year CDs with balances of $15,000 or more. That sounded perfect for my IRA that has been basically sitting dead in cash while I waited to see where this market was going to go.

Several other institutions are offering yields in the same ballpark, GMAC Bank and ING among them.

If you’re like me, and looking for something that at least comes with a guarantee of earnings (and FDIC backing), then you may want to do some shopping around yourself.

More unemployment woes

Bank of America rattled the economy last week with news it will cut 35,000 jobs.

That news came on the heels of Citibank’s decision to let 52,000 of its workers go.

Both announcements produced the equivalents of two small towns suddenly left without jobs.

Close to 2 million jobs have been lost since the recession began in December 2007, according to the Associated Press.

Depending what happens with the Big 3 auto-makers and ongoing bailout talks, that number could continue to grow. With all those people out of jobs not spending, that can’t bode well for stocks in the near future.

Brian

Harvard Endowment falls from grace

The Harvard Endowment, which holds funds for one of the nation’s most elite colleges, was a shining star earlier this year when it was reported it had earned 7 percent to 9 percent on its holdings as of the first half of the year.

That news was the envy of many professional fund managers who have mostly measured their successes this year by losing the least. Out of about 9,100 U.S. mutual funds, only about five have been profitable this year, Fortune has reported.

Well, now Harvard Endowment has joined the ranks of the multitudes.

The Wall Street Journal reported last week that the endowment had shed at least 22 percent — about $8 billion — from July 1 to Oct. 31.

The endowment could lose as much as 30 percent by year’s end, the article stated.

That would make for the worst loss by the Harvard Endowment since 1974. Then, it only lost 12.2 percent, according to the article.

Another fund that had earned a gold star is now posting some dismal returns.

The CGM Focus Fund, which is run by fund manager Kenneth Heebner and was the No. 1 U.S. diversified stock mutual fund last year, is currently off by 52 percent, the Journal reports.

But Heebner doesn’t expect that performance to continue.

Heebner had earlier stoked his fund’s returns by shorting, or betting against, financial stocks, is now taking large positions in financials like Citigroup (C), Bank of America (BAC) and Brazilian Banks Banco Bradesco SA (BBD) and Banco Itau Holding Financeiera SA (ITU), saying they are beyond cheap at the moment.

Heebner told the Journal that he believes such financials will rebound in the next year because of efforts by the U.S. Treasury and Federal Reserve to free up lending.

Looking for dividends?

If you’re looking for some stability in the form of dividends, here are six stocks that offer yield more than 6 percent, courtesy of the Wall Street Journal:
Altria Group (MO), tobacco company, 8.4 percent yield; Autoliv (ALV), auto parts, 9.4 percent yield; Consolidated Edison (ED), utilities,
6.1 percent yield; Eli Lilly (LLY), drug company, 6 percent yield; General Electric (GE), conglomerates, 8 percent yield; Oshkosh (OSK), trucks, 6.9 percent yield.

Just remember, great dividends can be cut by companies facing challenges in a dismal economy.
And dividends won’t offset a stock price that continues to fall.

It pays to check price stability over a long period of time, say five or 10 years, for a particular stock.

This can easily be done by going to Google Finance or Yahoo Finance and using historical price or chart features to see how a high-yielder’s share price has held up over the years.

It’s the economy, stupid

Last week’s non-farm payrolls report showing that the economy shed 533,000 jobs in November, the worst losses since 1974, is not likely to bring any quick relief to the stock market.

Housing also continues to be stuck in a rut, creating a double-whammy.

With only a little more than a month until President-elect Barack Obama takes office, all eyes are on him to see what he will do to put the economy on the right track.

Some pin hopes on an economic stimulus plan that send a new wave of checks to consumers.

Hopefully, if approved, that would be enough to get things moving again.

Brian