Taking Stock

Good old days again?

noreply@blogger.com (Bradenton Herald) — Thu, 16 Jul 2009 14:13:00 +0000

Goldman Sachs (GS) had a blowout earnings report this week and the Dow finally made it above 8,500 Wednesday in a nice 200-point-plus rally.

The Wall Street Journal on Thursday carried a story about how finance executives were again getting paid astronomical bonuses to deliver returns to their firms.

Could it be that happy days are here again? Possibly.

China is also showing signs that its slowdown is on the mend. That could be a good thing in terms of exports and commodities.

We'll have to see how things unfold in coming weeks.

Brian.

Rational or not, market is hanging in there

noreply@blogger.com (Bradenton Herald) — Wed, 01 Jul 2009 16:51:00 +0000

We've been around that 8,500 range in the Dow for some time now and have been getting some initial signs that the downturn might be stabilizing.

The National Association of Realtors announced this week that pending home sales were up again for the fourth consecutive month.

The Institute for Supply Management Index, which surveys purchasing managers at manufacturing firms, also showed resilience and slower contraction, according to MarketWatch. The index had the most favorable reading since last August.

We've been bouncing up and down in the 8,400-8,500 range since at least early May - another indicator that may point to some levelness and possible upward movement in the future.

But a few favorable numbers aren't enough to support full conviction, those in the bear camp say. In other words, proceed with caution.

Brian.

What a tangled Web

noreply@blogger.com (Bradenton Herald) — Fri, 26 Jun 2009 18:32:00 +0000

Regulations on the horizon that focus on how Internet retailers gather information from consumers have caused trade groups to try to beat rule-makers to the punch.

Don't be surprised to soon see an icon on certain Web pages notifying you that your activity is being tracked, according to a recent piece in the Wall Street Journal. When clicked, the icon would tell you what information the retailer gathers and which companies it shares the information with, according to the article.

Sites could also include a feature to allow Web surfers to decline having their information gathered. If I were designing the feature I would call it the "no-brainer" button.

Not suprisingly, one ad agency managing director told the Journal that limiting access to consumers' information would make it less likely that a marketer "can provide more timely, relevant and targeted ads to consumers."

I guess that's up to you, the consumer, whether that's a good or bad thing. I know what way I'll be clicking.

Brian.

Here's hoping these signs of life aren't elusive

noreply@blogger.com (Bradenton Herald) — Wed, 24 Jun 2009 14:29:00 +0000

Market watchers got a boost today with the release of durable goods data.

The data revealed that orders for durable goods - things like appliances, cars, and business equipment - rose 1.8 percent in the month of May. Stocks gained on the news after faltering the past few days.

But that doesn't mean happy days are here again.

Joe Keating, chief investment officer at RBC Bank, issued some bullet points about positives and negatives in the current environment. Here's a sampling:

The pace of single-family housing starts rose 7.5% to an annual rate of 401,000 in May, following readings of 373,000 in April, 361,000 in March and 357,000 in February and January.
The stability, and even a modest upward trend, in single-family housing starts since February point to the more than three-year slide in single-family home construction coming to an end. While we expect that a bottom in home building has been reached, a sustained rebound will likely not take hold until next spring due to the huge supply of existing homes still for sale, the record wave of mortgage foreclosures which is dumping more unsold homes on the market, the rise in mortgage rates since mid-March, which is cutting into affordability and the ongoing efforts by employers to cut jobs.
Industrial production fell -1.1% m/m in May after dropping -0.7% in April as the recession continues to hold back demand for manufactured goods, including automobiles, machinery and household appliances. The ongoing decline in industrial production -13.5% over the past year - is a sober reminder that even if the now 18-month-old recession is leveling out, it has not ended, and a return to a self-sustaining and self-reinforcing economic recovery is unlikely for a number of months.

Keating also said that consumer prices hardly rose in May, meaning that inflation is being kept in check.

Brian.

Steady as she goes

noreply@blogger.com (Bradenton Herald) — Fri, 22 May 2009 19:19:00 +0000

Everything's looking pretty good in the market lately.

That 8,000 level in the Dow has held strong and it seems like some individual stocks are continuing their upward trajectory.

I'm still staying right where I am.

But that doesn't mean you should.

If you've got the guts (like the ones I lack) then there are probably some really decent values in stocks right now. And if you use dollar-cost averaging, your are probably already taking advantage of some of the lowest stock prices we've seen in a long time.

But I still have too much of a sense that we're not out of the woods yet. And that keeps me on the sidelines.

Happy investing.

Brian.

This rally has legs

noreply@blogger.com (Bradenton Herald) — Wed, 06 May 2009 20:59:00 +0000

Don't want to jinx it, but Wednesday saw another nice close and had the Dow holding steady at around the 8,500 level.

Part of the buoyancy was attribted to a better-than-expected jobs report from payroll administrator Automatic Data Processing.

The report showed that non-farm payrolls fell 491,000 in April, the smallest jobless decline in six months.

There are still many barriers to overcome and some have suggested we're seeing nothing more than a bear market rally, albeit a healthy one.

Buy-and-holders will shrug off any such analysis, but active traders may want to stay alert.

Brian

Nice close today. Is the rally for real?

noreply@blogger.com (Bradenton Herald) — Mon, 04 May 2009 20:30:00 +0000

The market's been trending up, up, up.

Somehow, despite all the lack of confidence about the bank stress tests and the swine flu, the Dow Jones closed up 214 points, to 8,427.

That's quite a bit above the low of 6,594 we saw in March - a nearly 28 percent gain in fact.

I admittedly snoozed while it passed me by.

But is this rally going to stick for awhile?

That's anybody's guess, but some have suggested that if you missed this spike, it may already be getting ready to fizzle.

I guess we'll just have to see.

Brian.

Some bright spots among earnings

noreply@blogger.com (Bradenton Herald) — Mon, 27 Apr 2009 03:39:00 +0000

It’s earnings season, and everyone knew most companies were going to report lackluster figures.

But there were a couple of exceptions this past week.

Amazon (AMZN), the online retailer, posted a first-quarter profit that beat expectations.
The company’s sales jumped 18 percent to $4.89 billion, and its net income jumped 24 percent to $177 million.

Amazon CEO Jeff Bezos said the company benefited from consumers shifting more and more to online shopping, the Wall Street Journal reported.

The company has also increasingly been bringing outside merchants on to Amazon’s site to sell goods like jewelry, Bezos said.

The report was cause for celebration, but Amazon officials expressed caution for coming quarters due to the continuing recession.

Netflix (NFLX), the DVDs-by-mail and online movie rental company, also brought good news to the mostly lackluster earnings season.

The Los Gatos, Calif., company said its subscriptions had jumped by 920,000 during the quarter.

"More budget-conscious Americans are embracing low-cost movie rentals over higher-priced theater tickets," reported Investor’s Business Daily.

So there are a couple of bright spots amid the earnings carnage.

Microsoft (MSFT), however, was not so lucky. The software giant’s profit fell 32 percent, and sales of Windows software declined 16 percent from a year earlier.

As for me, I’m still playing it safe. Even though it looks like some things are improving and the market is showing some stability — at least hanging in at the 8,000 level in the Dow — there are still plenty of reasons to be cautious.

Global growth has slowed, and the International Monetary Fund recently projected that the downturn will continue in all countries as surpluses of various goods continue to pile up.

The Wall Street Journal reported this week that small-business owners are not taking salaries in an effort to help them stay afloat.

An American Express survey showed that 30 percent of 727 small-business owners and managers were not taking salaries. The Journal called that a troubling sign, because small businesses have created a significant share of U.S. jobs in recent years.

If more jobs continue to be lost, the market can only go one way — down. Let’s hope that a turnaround is in the making.

As for me, again, I’m too scared to tread in yet.

Brian

Dollar-cost averaging may make sense

noreply@blogger.com (Bradenton Herald) — Mon, 23 Mar 2009 03:38:00 +0000

I’m struggling with what to write about this week because everything still seems so uncertain.

The market has shown some signs of resilience recently, but I’m still skeptical.

Some investment firms like Zack’s Research are suggesting a gradual allocation into stocks, even while the jury is still out on when we can expect the market to rebound.

Zack’s gives the example of a person with $30,000 to invest in the market.

That person should incrementally add to his or her positions in $5,000 or $10,000 increments, according to the research firm. The dollar-cost averaging approach makes sense, according to

Zack’s, because no one can accurately predict the bottom.

By dollar-cost averaging, one has a better chance of taking a position that will put one on better footing once the market returns to its full glory, according to the research firm.

I currently dollar-cost average with a Vanguard account that has a total stock market index fund and two international funds.

Each month a certain amount is drawn from my bank account and deposited into Vanguard.

Yes, even though I’m guilty of market timing in the account I typically trade in, I do still believe in making regular contributions to a retirement account.

Granted, that retirement account has been cut in half since the market began its downward spiral more than a year ago. But I’m still picking up shares at cheaper prices and I have no doubt that when the market returns to normal I’ll be sitting pretty.

Credit cards to implode next?

Meredith Whitney, the woman known for predicting the recent banking crisis and the CEO of Meredith Whitney Advisory Group LLC, is now forecasting another looming crisis ahead of us.

In a recent editorial in The Wall Street Journal, Whitney discussed how credit cards will likely be the next credit crunch in the United States.

She predicts that more than $2 trillion of credit-card lines will be cut in 2009 and $2.7 trillion by the end of 2010.

"Inevitably, credit lines will continue to be reduced across the system, but the velocity at which it is already occurring and will continue to occur will result in unintended consequences for consumer confidence, spending and the overall economy," Whitney wrote in the Journal.
"Lenders, regulators and politicians need to show thoughtful leadership now on this issue in order to derail what I believe will be at least a 57 percent contraction in credit-card lines."

Whitney acknowledges in the piece that credit was given away to freely in recent years.

But, "If credit is taken away from what otherwise is an able borrower, that borrower’s financial position weakens considerably," she writes. "With two-thirds of the U.S. economy dependant upon consumer spending, we should tread carefully and act collectively.

Indeed.

Brian

Don’t be fooled by one good week

noreply@blogger.com (Bradenton Herald) — Mon, 16 Mar 2009 03:31:00 +0000

A couple of really good days in the market this past week brought more speculation that we were finally at the bottom.

Don’t buy it. At least not yet.

True, the Dow did close up nearly 600 points on the week — a 9 percent gain.

But we’ve seen this kind of action before, only to have it followed by the opposite action.

“This is probably a bear-market rally, but we’ll accept it for what it is,” Steven Roge, a portfolio manager with R.W. Roge & Co., told the Wall Street Journal.

Roge said he expects the S&P 500, now at the 750 level, to fall to about 600.

Of course, one never knows what fuels such predictions. Could it be Roge has short positions he wants to continue to take advantage of in a downward moving market? Is he just guessing?

It’s hard to know.

But he’s not alone in his opinion that a couple of decent up days do not necessarily translate to the bottom being reached.

However, it’s probably not a bad time to start eying some stocks that show promise upon recovery.

James B. Stewart, who writes a similar column to this (although for a much bigger paper, The Wall Street Journal), has started accumulating some stocks recently and has, in fact, been nibbling at stocks during much of the downturn that began in December of 2007.

Some of the stocks Stewart likes at their current levels are General Electric (GE), Quality Systems (QSII), a health care stock and retailer Buckle (BKE).

Stewart also bought General Mills (GIS) and Amazon (AMZN).

Summing up his convictions, Stewart wrote: “The market experienced a rare rally Tuesday, which naturally comes as a relief. But even before this, I felt good about buying these stocks. After years of practice, maybe I’m getting my emotions into line with my rational conviction.

“Which is, to echo the president, that this is a great opportunity to buy, no matter where the market goes in the next weeks or months.”

That got me thinking.

Maybe it’s time to quit sitting out after all.

Nah. I think I’ll stay where I am.

I need some more convincing.

But I do hope that maybe last week did bring about a turning point and we can get back to the business of making money again.

Brian

Numbers keep market in a plunge

noreply@blogger.com (Bradenton Herald) — Mon, 09 Mar 2009 03:31:00 +0000

I knew this past week was going to be bad, but I didn’t know how bad.
The nation’s jobless rate hit 8 percent, the highest level in 26 years, which served to place the Dow in 6,000 territory.

Locally, Manatee County’s jobless rate hit the 10.1 percent level. It was in the 2.9 percent range when I started working here just under three years ago.

And experts say the nation’s unemployment picture is going to get worse before it gets better.

That doesn’t bode well for stocks, and the market as a whole.

Last year, people were predicting the Dow would fall to 5,000. Myself and others thought this was ludicrous and representative of the sky-is-falling mentality.

Now, it doesn’t seem so far-fetched.

According to one market expert, 5,000 in the Dow might be wishful thinking.

Peter Eliades, who runs the Stock Market Cycles investor newsletter, was recently interviewed by MarketWatch about his thoughts on where the market is heading.

Eliades predicted that the Dow may actually fall to the 4,000 level in the near-term, and offered little in the way of optimism for investors.

In fact, he recommended that investors take advantage of any future rallies to lighten up on stock positions. He believes that any rally in the near future will be a bear market rally.

Asked where investors might find opportunity, Eliades told MarketWatch that gold has the potential to be a sound long-term investment and may reach $2,000 an ounce.

"But gold is not a place for the average investor to be, because it’s too volatile," he added.

Fear in the air

As for me, I’m scared to death to invest in anything at the moment. And with the market’s action of late, I’m apparently not alone.

All the experts say this is exactly the time when stocks make sense — essentially, when the fear is palpable and "blood is in the streets."

But this fear has been going on for some time, all the way back to December 2007 when this recession supposedly began.

Since then, 4.4 million jobs have been lost and the headlines in The Wall Street Journal continue to carry descriptors like "worst," "lowest," "bad" and "horrible."

Yes, the best buys are to be had when others have sold everything and are too scared to reenter the market.

But knowing when that time has truly arrived is next than impossible to determine.

So I remain on the sidelines.

Hopefully when the true rally arrives, it doesn’t pass me by.

Brian

Next stop: 6,000 on the Dow?

noreply@blogger.com (Bradenton Herald) — Mon, 02 Mar 2009 04:37:00 +0000

We came precariously close this past week of edging down below the 7,000 mark in the Dow.

In fact, a mere 64 points separated us from 6,999 in the Dow at the market close Friday.

The government’s announcement that it was taking an even bigger stake in Citigroup (C), General Motors’ (GM) $30.9 billion loss for the year and continued bad news about manufacturing and consumer spending have all served to keep any attempts at gains in full check.

Data on deck for this week may make that plunge into 6,000 territory a certainty.

Economists surveyed by MarketWatch believe that Labor Department data to be reported this Friday is going to show more than 30,000 jobs lost in February than January.

Those economists expect payrolls have fallen by 630,000 in February and the national unemployment rate will increase from 7.6 to 7.9 percent, according to MarketWatch.

"With total revenue declining at its worst pace since the late 1950s, many businesses and governments are in survival mode and have no choice but to cut jobs," Wachovia economists said in the article.

Meanwhile, the market will be watching the outcome of the government’s "stress test" being conducted on the nation’s banks.

Basically, the test involves seeing how the nation’s biggest banks would hold up under the theoretical scenarios of unemployment climbing to 10 percent and home values falling another 25 percent (that may not be so far-fetched).

The government sees this as a way to accurately gauge whether or not nationalizing of certain banks is needed.

Banks that failed the test would have up to six months to address any capitalization or other problems.

But critics are already knocking the test, questioning its ability to actually predict how certain banks will fare if conditions continue to deteriorate.

And investors don’t want to see nationalization, for fear that the government’s ownership of a certain institution will turn into a protracted affair that would dilute shareholder equity.

It should be interesting to watch all of this unfold, but you may want to turn off the financial news on TV this week. It’s probably going to be a bumpy ride.

Brian

Market sinks like an anchor

noreply@blogger.com (Bradenton Herald) — Mon, 23 Feb 2009 04:57:00 +0000

I’m fond of telling people that I bought Bank of America (BAC) about a year and a half ago at $52 a share when it was supposedly "cheap."

Its price-to-earnings ratio was around 9 and it paid a respectable dividend.

Well, as the banking crisis continued to unfold, Bank of America’s price continued to slide, and because I was adhering steadfastly to my rule of selling any stock at an 8 percent loss, I cut my losses before serious damage was done.

But as I stared at the ticker on CNBC this past Friday, I was shocked to see Bank of America trading for 3 bucks and change. Holy cow, I remarked to my wife.

"Some people are going to make a killing," she said, referring to those with lots of cash on the sidelines to pour into beaten down stocks.

But I believe that any speculation on devalued stocks at this point is nothing short of gambling.
In fact, Jason Zweig of The Wall Street wrote over the weekend about the perils of playing what he called "lottery stocks" — stocks that have fallen so far in price that investors desperate to make up for recent losses pile into them in hopes of winning the big one.

"Like a Powerball ticket, these stocks cost almost nothing and offer a high chance of losing," Zweig writes, "but that still leaves them with a kicker of hope, because if they do ever win, they could win big."

Zweig spoke with a finance professor at the University of Texas at Austin who has done research that shows people load up on these lottery stocks most during economic downturns.

Every once in a while a lottery stock will win big, the professor said, but more often than not it won’t.

Nationalize the banks?

The weekend Wall Street Journal carried an interesting interview with Nouriel Roubini, a professor at New York University’s Stern Business School.

What was interesting about the interview is that Roubini is in favor of what the prevailing market sentiment seems to be against: nationalizing the banks.

Do it, Roubini says, otherwise we’ll perpetuate the ongoing banking crisis for much longer.

Roubini says that even banks that look solvent today are probably going to start looking insolvent six months from now.

He says it doesn’t make sense to pour huge sums of money into soon-to-be-insolvent banks in order for them to take over banks already insolvent.

"It doesn’t work!" Roubini told the Journal. "You can’t take two zombie banks, put them together, and make a strong bank. It’s like having two drunks trying to keep each other standing."

Roubini advocates a temporary taking over of the banks by the government for restructuring and eventual placement back with private ownership. If nationalization is a dirty word, then call it "temporary receivership" he says.

What do you think? I’d like to know.

Brian

Wake me when the market improves

noreply@blogger.com (Bradenton Herald) — Mon, 16 Feb 2009 04:26:00 +0000

So much for that rally.

It looked like the indexes were gaining ground and holding at the 8,000 level in the Dow during the last week or two.

But that all fell apart at the end of the week. One shouldn’t expect it to get any better this week, either.

There is a raft of economic data on deck and economists are pretty much expecting it all to be miserable.

As a Sunday MarketWatch article began: "You know things are bad when the best economic news over the coming week is likely to be a report showing that consumers paid higher prices for goods and services."

Housing, manufacturing and layoff data is expected to all be bad.

However, there may be a silver lining.

President Obama is expected mid-week to outline plans to forestall more foreclosures in the nation, which are decimating the country’s wealth and consumers’ spending power.

No doubt, economists and those who play the market will be watching this development carefully, and if enough confidence is deciphered from Obama’s words, it might not be the bloody week in the markets that it is shaping up to be.

As for me, I’m closing my eyes to it all for awhile. And I have to admit, it feels pretty good.

Brian

Market showing stability, but do you bite?

noreply@blogger.com (Bradenton Herald) — Mon, 09 Feb 2009 04:46:00 +0000

A funny thing’s been happening over the course of the past week or two.

Despite mounting layoffs and dismal earnings data, some badly beaten-down stocks are starting to show some resiliency and improvement.

I’m thinking here of Mosaic (MOS) and Apple (AAPL), just to name a couple.

Nothing seems to explain the fact that Mosaic, which had fallen from the $40s to the $27 range in December, charged back to above $45 during the past week.

Apple, which had taken a drubbing for more rumors about its CEO Steve Jobs’ health and was clinging to the 80s, finished Friday just below $100 a share.

Raise a glass to the buy-and-holders. If I had stayed in either one of those stocks I would have been back in the money.

But I didn’t and I’m not.

It seemed like old times watching Jim Cramer on "Mad Money" on Friday, too.

He seemed to be emboldened and working with a new energy as his sound effects panel shouted, "Buy, buy, buy!"

But should you?

The market has, indeed, been showing some resiliency. Each time the Dow has dipped below 8,000 it seems to fight its way right back up.

Friday’s 217-point rally in the Dow put the index firmly back at the 8,200 level.

But there is still a preponderance of bad news out there.

The nation’s unemployment rate edged up again to 7.6 percent and it’s actually news these days if a company isn’t announcing any layoffs.

This past week The Wall Street Journal reported that retailers, slammed by the recession and the associated lack of consumer spending, had stopped making earnings forecasts about upcoming quarters because their projections are too predictable, given the bloodshed that is almost sure to continue.

So why is the market moving up — or at least stabilizing?

Investor’s Business Daily took a stab at an explanation over the weekend in an editorial titled "A Tale of Two Indicators — Jobs and Stocks," penned by CNBC personality and economist Lawrence Kudlow.

In it Kudlow writes of the widely held belief that the stock market is a forward-looking beast, while economic data view things in the rear-view mirror.

"So stocks may now be telling us that the gloom-and-doom crowd — and its pessimistic economic prognostications that cover all of 2009 and in some cases 2010 — is about to be proven wrong," Kudlow writes.

Kudlow theorizes that cheaper energy, the creation of new money and current financial system rescue initiatives could bode well for a pleasantly surprising 2009.

Then again, Kudlow has always fallen on the side of optimism.

As for me, I’m encouraged, but I want to see this faint light at the end of the tunnel shine on for more than just a couple of weeks before I wade back in to the market.

Brian

More bad news sinks stocks

noreply@blogger.com (Bradenton Herald) — Mon, 02 Feb 2009 04:21:00 +0000

More bad news came our way this week in terms of the economy.

Fourth-quarter gross domestic product fell 3.8 percent, making for the worst showing since 1982 and a blow to any hopes that 2009 is going to be coming up roses.

President Barack Obama said the poor economic news was another reason that it’s important an economic stimulus package is passed quickly.

The Dow Jones Industrial Average had been working to climb off that 7,900 level, but after the lackluster GDP news, it closed Friday right at 8,000 — far from the 14,100 record level set in October of 2007.

According to the Wall Street Journal, last month was the worst January the Dow Jones every experienced in its 113-year history.

It lost 8.84 percent for the month and saw its fifth consecutive month of declines, the newspaper reported.

"Smart investors are sitting on the sidelines," David Henderson, president of Raven Securities, told the Journal. "There’s not much conviction one way or the other."

More and more ads are showing up on TV appealing to the frugal side of us consumers.

Whether it’s the woman in the grocery store sawing every item in half for affordability’s sake (except the Velveeta) or Wal-Mart telling us how much we can save by eating frozen dinners rather than going out, the prevailing consciousness is saving money at the moment.

And that’s not good for stocks.

Despite the recent rottenness, Investor’s Business Daily still put a border around one of its stock charts this week, signifying the newspaper believes the stock might be a good buy right now.

That stock is Gilead Sciences (GILD), a company that makes therapies and treatments for HIV and other viral diseases.

Gilead has a three-year earnings-per-share growth rate of 35 percent and a three-year sales growth rate of 38 percent, according to IBD.

The company is also about to benefit from China introducing its Viread HIV drug to patients in that country.

Back when things were rocking along, a given edition of IBD might have seven or eight stocks highlighted each day as possible buys.

But with the state of the market, it’s not surprising that there is only one.

There was some brighter news on the retail front this week.Amazon.com (AMZN) saw its profit rise 9 percent in the fourth quarter. Sales grew 18 percent during the same period. The results from the online retailer beat expectations by Wall Street.

But the company has a lot of lost ground to make up.

Amazon’s year high was $91.75. Currently, it’s trading in the $58 range.

Brian

Range trading may be idea worth considering

noreply@blogger.com (Bradenton Herald) — Mon, 26 Jan 2009 04:55:00 +0000

We keep tip-toeing around the lows of 7,400 or so in the Dow we hit in November.
It seems like, out of the gate anyway, that Obama effect many were looking for has been a no-show.

Layoffs continue at a break-neck pace and the consumer is tired and broke.

Bottom line: It’s a long way up and it may also be a long way down.

But there may be opportunities there for the more astute and gutsy of investors out there.

Those opportunities come in the form of trading in a range.

The current market’s oscillation between the high 7,000 range and the upper 8,000 range lends itself to investing in stocks that are exhibiting the same action.

In other words, if you spend a little time watching a particular stock or two, you’ll get hints about how their price action follows that of the overall market.

Over time, you’ll find a range in which those stocks are trading.

Buy in when the stock is at the bottom of its range and sell when it gets near the top.

Sounds simple enough, you say.

But it’s not. In fact, it can be a little challenging — and nerve-wracking — figuring out when to buy in at the right time and how to sell before it falls again.

Apple (AAPL) and Dryships (DRYS) both seem to be good candidates for this strategy.

Apple’s been oscillating between the 80s and high 90s since October, a peek at its chart on Bigcharts.com shows.

Its track record has been pretty decent and could make a good range-trading play — if that is, something sensational like CEO Steve Jobs’ recent leave of absence for health reasons doesn’t beat the price down even more.

Dryships also had a tradeable bounce in the last few weeks, going from about $9 a share to around the $14 range.

Even after taxes on a short-term trade, that 5 points wouldn’t be anything to sneeze at.

Is this investing? No. Is it more akin to gambling? Absolutely.

But with the market in the state it’s in, buy and hold is obviously not working.

Unless, of course, you’re buy-and-holding cash or CDs.

Fishkind says more pain ahead

Henry Fishkind, a noted Florida economist, was in town last week to give his annual Economic Forecast Breakfast, sponsored by Whitney Bank and the Manatee Economic Development Council.

His message?

More tough times ahead.

Fishkind predicted that economic output and the housing market won’t start showing signs of life until at least the latter part of this year and a full recovery shouldn’t be expected until 2011 or 2012.

But Fishkind also said that the recent stimulus programs from the government, and the others to come, should ensure we get back on solid footing.

Let’s hope so.

Brian

Sounds too good to be true? Run.

noreply@blogger.com (Bradenton Herald) — Mon, 19 Jan 2009 04:52:00 +0000

We’re all guilty at some time or another of greed.

Whether it’s rushing in for that last slice of pizza — knowing that you could do without it and the others in the room have had less — or, say, plunking a bunch of your hard-earned money into a hedge fund promising stellar returns and market-beating performance.

That’s apparently what happened to investors who committed millions of dollars to a hedge fund run by Sarasotan Arthur G. Nadel.

According to various local news reports, Nadel has vanished, along with about $350 million in funds investors placed with his hedge fund.

In times like these, especially, when most CDs are earning a paltry 1 percent or 2 percent, and stocks — well, let’s not go there — it’s easy to lose sight of logic and walk zombie-like into the clutches of that banner ad touting 10 percent, super-safe CDs, or a guy who can guarantee market-beating returns, no matter what.

To be fair, Nadel has not been charged with a crime.

And the fact that, as reported, his car was found at the Sarasota-Bradenton International Airport, may not necessarily be a bad thing.

Maybe he had to fly somewhere to straighten out the investments for his clients — you know, meet with his people, or his people’s people.

Then again, maybe he flew the coop and investors are left holding the bag.

The incident immediately began drawing comparisons to Bernard Madoff, the New York hedge fund manager who is accused of ripping off investors to the tune of $50 billion in a Ponzi scheme that funded returns from existing investors by taking money from new investors.

Eventually the well runs dry.

Rene-Thierry Magon de la Villehuchet lost more than $1 billion to Madoff’s scheme.

He also disappeared — with the help of sleeping pills and a box cutter he used to slash his wrists.

Point is, there are no sure-things. There are no safe investments that are going to produce spectacular returns consistently.

I learned this firsthand last year, when I was lured to auction-rate securities.

These vehicles — which were essentially short-term debt and commercial paper that reset after being sold at auctions every seven or so days — were touted as being safe as cash and just like a CD, except liquid.

I didn’t have to commit to six months or a year, and I was earning 5 percent, or even more, on my money.

What more could one ask for? The market was beginning its rapid descent, and I thought I had found myself the equivalent of buried treasure.

Why didn’t more people think of using these things?

Then came the bad news: The demand for the auction-rate securities dried up and people — including myself — saw their funds being frozen, unable to redeem their shares.

Luckily, I was able to get out and recoup my funds, but some investors have had to resort to extensive litigation that continues today.

So if it sounds too good to be true, it probably is. Sometimes there is no substitute for time and patience.

And Nadel, wherever you are, some people want to ask you some questions.

Brian.

No way to soften blow of really bad year

noreply@blogger.com (Bradenton Herald) — Mon, 12 Jan 2009 05:00:00 +0000

This has been a bear of a year.

I thought I had it all figured out.

Thought I was pretty smart, actually.

I was bobbing and weaving, buying and selling — sticking to a system that had me cutting my losses early before they escalated and taking a profit at the right time before the love for a stock died.

I rode Apple (AAPL) like a hobby horse, riding it up, taking my profit, then buying it back on the dip to squeeze a little more out of it on the next climb.

I enjoyed quick profits on under-the-radar stocks like Enersys (ENS) and Atwood Oceanics (ATW).

I was up more than 10 percent in my portfolio and gloated when I got my brokerage statement that showed a graph of my performance versus the common benchmarks — my performance being far superior.

Then, all of that came to an end.

As I’ve written before, I finished the year down 10 percent, closed my fee-based trading account and stuck my money in a CD.

Others have fared much worse, losing half or more of their retirement savings with no clear sign of a rebound in sight.

Buy-and-holders like John Bogle, founder of Vanguard investments, say now is no time to cash out of the market.

Doing so means you are guaranteed to be saddled with your losses, they say.
But hanging on to your stocks with what increasingly seems blind faith can be hard to do.

There are some things pointing to a recovery.

The fact that the major indexes have already plunged more than 40 percent is actually a good thing in some people’s minds.

It means that a lot of the major selling has already taken place and stocks may be at prices more indicative of their fundamental values.

As price-to-earnings ratios get lower and lower, investors have more reason to believe that share prices will hold up as the bottom is reached and we emerge from this nasty downturn.

Although there are plenty who say the market could fall much farther at this point, their are an equal number of investment professionals who are seeing dollar signs in some downtrodden stocks.

There is another reason to take heart: The market only goes one way over time — up.

That was poignantly illustrated for me by an American Funds chart a reader sent me a while back, out of his annoyance at my market-timing view.

The color chart included presidents all the way back to the Great Depression. Through wars and recessions. Through every imaginable catastrophe, including 9/11, stocks continued their steady climb.

A 40 percent drop seems like staring into a giant abyss. But on that chart, assuming it’s printed again in 10 or 20 years, our current market chaos will appear as a mere blip.

Sometimes it pays to step back and take a larger view.

Here’s hoping that 2009 gets us back on that upward march again.

Brian

Living between two fears

noreply@blogger.com (Bradenton Herald) — Mon, 05 Jan 2009 05:03:00 +0000

This past Friday was a pretty nice little rally.

True, the volume of buying wasn’t that great, given the fact that it was at the end of the holidays. But the Dow’s jump of 258 points on Friday was nothing to sneeze at given the mostly flat, go-nowhere activity we’ve seen in recent weeks.

And that scares me.

It scares me because I know that the market’s been decimated more than 40 percent, and a decent surge like that after all the flatness we’ve seen could signal that people are ready to step back in again.

It scares me because I know that the money I have locked up in a CD that would have been allocated for stocks will make nothing even close to what it would in a decent bull rally off a market bottom, even if it did turn out to be one of those short-term cyclical rallies.

For instance, when I wrote about Dryships (DRYS) in my column last Monday, it was at about $9 a share. It closed on Friday at $12.49. That would have been money already made, and probably more to come if the bullish sentiment holds.

But that’s a big “if,” and plenty of other stocks that I actually owned are at or below the point where I sold them before getting completely out of the market several weeks ago.

And that also scares me.

People have been heralding the bottom for months now. They did it when the Dow was at 11,000. They did it when the Dow fell below 10,000. They did it — well, you get the idea.

True, no one — not even the best of them — can accurately predict a precise market bottom.

But there’s no reason to ride stocks down another 40 percent or 50 percent as one local economist predicts.

Rodney Johnson, president of H.S. Dent investments in Tampa, told the St. Petersburg Times that he thinks the Dow will peak between 9,600 and 10,000 during 2009, but will fall again, leading to a true and deep bottom in 2012.

How low will it go?

To between 3,800 and 4,500, Johnson predicts.

Yikes.

Of course, Johnson was in the minority of the other investment experts the Times interviewed.

Their predictions were more optimistic, yet still guarded in terms of how much of a climb we might expect to see this year.

Will I enter the stock market again this year?

Probably.

Will I be faked out by what appears to be a decent rally and lose money?

I’d put those chances at about 50-50.

Am I enjoying some relaxation and better sleep knowing that my money is in an old-fashioned CD instead of worrying about what bit of misguided news or some analyst’s comment will do to the share price of a stock I own?

Absolutely.

But if I see another couple of days like Friday this week, I might start losing sleep for a different reason.

Brian

Where is this economy going?

noreply@blogger.com (Bradenton Herald) — Mon, 29 Dec 2008 04:57:00 +0000

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

noreply@blogger.com (Bradenton Herald) — Mon, 15 Dec 2008 04:59:00 +0000

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

noreply@blogger.com (Bradenton Herald) — Mon, 08 Dec 2008 04:50:00 +0000

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

Time running out for Fortune stock picks for '08

noreply@blogger.com (Bradenton Herald) — Mon, 01 Dec 2008 04:46:00 +0000

In December of last year, Fortune magazine came out with its list of "The Best Stocks for 2008."

Supposedly, they were 10 stocks that "will thrive despite — or even benefit from — the troubles facing the markets next year."

Well, all I’ve got to say is they better hurry up and get to thriving.

Of the 10 stocks, only one, biotech Genentech (DNA), is up from the price it was back in December.

And some of the remaining nine, like General Electric (GE) and Electronic Arts (ERTS), have declined 50 percent or more.

Here’s a rundown of the stocks, with their price in December, followed by Friday’s closing price:
Annaly Capital Management (NLY), $17; $14.37
Berkshire Hathaway B shares (BRK-B), $4,750; $3,499
Dick’s Sporting Goods (DKS), $32; $12.61
Electronic Arts (ERTS), $55; $19.06
Genentech (DNA), $67; $76.60
General Electric (GE), $37; $17.17
Jacobs Engineering (JEC), $87; $44.77
Merrill Lynch (MER), $59; $13.22
Petrobras Energia (PZE), $11; $6.65
St. Joe (JOE), $28; $26.41

This is not to pick on Fortune. After all, everyone has had a pretty rough go of it this year in terms of stock-picking.

But it does teach a valuable lesson: Think twice before diving into recommendations carrying hyperbole. "The best," and "The hottest," and "Surefire" picks may turn out to be just the opposite.

A wise investment?

Investor’s Business Daily carried an article over the weekend taking a look at stocks and real estate investment trusts that focus entirely on senior living facilities.

"A senior-housing-focused business is not necessarily reliant on or impacted as much by things like GDP growth, consumer spending, employment growth and business travel," Keven
Lindeman, director of real estate services with SNL Financial, told the newspaper.

But the article cautioned that the senior living space was not totally without worry. At least for the time being, there seems to be a senior living center glut as declining home values have delayed some seniors from moving into such facilities.

One company that stands out, according to the article, is nursing home operator Ensign Group (ENSG), which has posted double-digit profit growth for four quarters.

Sleeping well on the sidelines

Once again, I am out of stocks and waiting for a clear sign that "up" is the new direction.
The Dow has posted five straight days of gains, but the volume, or number of shares trading hands, hasn’t been all that convincing.

I’m keeping my eye on some stocks, but mostly I’m just relaxing and not obsessing on the market. It’s much easier that way, but I know I’m going to turn around one day and see that a rally has begun anew.

Brian

Things to be thankful for, and it ain't the market

noreply@blogger.com (Bradenton Herald) — Mon, 24 Nov 2008 05:03:00 +0000

Though Turkey Day is on the horizon, this year hasn’t given us much to be thankful for, at least as far as the stock market goes.

With the holidays coming on, I was going to try to stay upbeat.

I wasn’t going to talk, for instance, about how once again I have cashed in all my shares and given up hope about the stock market.

I wasn’t going to talk about how the Vanguard 401(K) into which I’ve been faithfully dribbling what little cash I can each month has been cut in half in the past six months.

Nor was I going to mention that I was less than encouraged about Friday’s fat rally of nearly 500 points in the Dow, because I know that recent history says this week will be full of more ups and downs — but mostly downs — and the uptick hardly makes up for the 43 percent cliff the index has fallen over since the highs in October of last year.

I wasn’t going to talk about how all those comparisons of the current market to the Great Depression seemed so crazy six or eight months ago, but now don’t seem so far-fetched after all.

So I won’t.

Instead, I’ll spend the rest of this column talking about some of the things I am thankful for.

I am thankful for the fact that my 12-year-old son, Brady, is coming to visit me from New Jersey this Thanksgiving. He lives too far away and I don’t see him enough, so I am thankful he is coming. I plan to send him home well-fed.

I am thankful for my new little boy, Cooper, and even though he is too young yet to gobble any gobbler I’m sure he’ll get a kick out of meeting his brother for the first time.

I’m thankful for my oldest son, Justin, and even though he won’t be able to make if for the holidays, I’m thankful he’s safe and he’s thinking about the future.

I’m thankful for my terrific wife, Stacey, who puts up with my blathering about the stock market all the time.

I’m thankful for cookbooks, good wine and great Scotch — even though I’ve been drinking the discount stuff lately.

I’m thankful for the invention of the iPod.

I’m thankful for Dostoyevsky. Ditto Henry Miller, Cormac McCarthy and Gabriel Garcia Marquez.

I’m thankful for the Coen brothers.

I’m thankful I have a job.

I’m thankful I don’t have to stand in the unemployment line.

I’m thankful I have enough to eat.

I’m thankful I’m not an auto worker, or an employee in the financial industry, or a bank robber, or a sports commentator.

I’m thankful I live in this country, though I know it has its problems and a lot of people abroad don’t like us very much.

I’m thankful for the outcome of the election, even though I’m probably not supposed to say that because it will be interpreted that I’m biased.

Don’t worry, I’ll still criticize him if he doesn’t do a good job, and he’d better, because we need more than anything right now for a good job to be done.

That would be something we could all be thankful for.

Happy holidays.

Brian