Stockhopper

Stimulus Withdrawal

2010-01-06T09:32:00.004-06:00

We know that 2009 was the year of the stimulus. Our economy was pumped and propped up through both fiscal and economic policies that staved an in-bounding depression. Whether that was good or bad will be debated over the ages, but the fact remains that it happened. What we need plan for this year and next year is the removal of this $2 trillion of play money. That's a scary thought.

Realistically, asset prices will see a reset. This will include stocks. Be alert and be cautious.

Getting Harder to Defend Zero

2010-01-05T14:36:00.002-06:00

As the markets continue to move up and the economy seemingly recovers, the Fed is faced with the difficult decision of raising interest rates in 2010. This will be a difficult process because unemployment is still very high and personal balance sheets are still damaged. Most major banks have repaid TARP whether for the right or wrong reasons, yet they continue to be stingy on lending money. Stimulus dollars are still at work but sooner rather than later that well will dry.

These are just some of the currents that are criss-crossing in today's economy. It's ugly and confusing. But, that makes for opportunities to reveal itself when the time arrives. I think 2010 will be more of a trader's year as opposed to the buy-n-hold year we had in 2009. Here's to 2010...

Dennis Gartman's Rules of Trading

2009-12-19T15:11:00.002-06:00

There are a lot of trading rules that have been espoused through the ages. Some are worthwhile but most are just not that useful. I came across Dennis Gartman's "not-so-simple" trading rules and found them incredibly sage.

Rule #1: Never, ever, under any circumstance, should one add to a losing position...not EVER!
Rule #2: Never, ever, under any circumstance, should one add to a losing position...not EVER!
Rule #3: Learn to trade like a mercenary guerrilla.
Rule #4:Capital is in two varieties: Mental and Real, and, of the two, the mental capital is the most important.
Rule #5: The objective of what we are after is not to buy low and to sell high, but to buy high and to sell higher, or to sell short low and to buy lower.
Rule #6: Sell markets that show the greatest weakness; buy markets that show the greatest strength.
Rule #7: In a bull market we can only be long or neutral; in a bear market we can only be bearish or neutral.
Rule #8: "Markets can remain illogical far longer than you or I can remain solvent."
Rule #9: Trading runs in cycle; some are good, some are bad, and there is nothing we can do about that other than accept it and act accordingly.
Rule #10: To trade/invest successfully, think like a fundamentalist; trade like a technician.
Rule #11: Keep your technical systems simple.
Rule #12: In trading/investing, an understanding of mass psychology is often more important than an understanding of economics.
Rule #13: Do more of that which is working and do less of that which is not.

I know there have been tweaks to these Rules since this particular list was published but if you can master the Rules here you will be a much better trader.

Glut of Homes

2009-12-11T11:24:00.003-06:00

Here's the deal. Recently, I've been following the Chicago real estate market and things don't look so good. Why? Well,for one thing there are a lot of homes listed on the market. Another thing, foreclosure and short sale listings splatter the pages. Moreover, asking prices continue to go thru corrections, i.e., price reductions, after being on the market for 3-6 months with no bids.

Chicago is littered with high-rise apartment buildings and if you were to find one apartment for sale in one of these buildings you are likely to find 5 others available for sale. Competitive pricing is key if you want to really move your home. But, this doesn't bode well for any of the sellers or the other residents who own in the same building. Home values are still being re-priced.

Single family homes in popular neighborhoods that fetched $1.25 million 3 years ago are now priced to sell at $750,000. That's a 40% reduction in asset value. Ouch! But, the sad part is that no one wants to buy despite the "deal." Frugality is en vogue and having a 4 bedroom, 3 .5 bath home is just too excessive. These homes are just not getting moved.

What this says is that overall home prices are still trending lower. Owners are still holding steadfast to property values attached from 3 years ago. They are just hoping for a rebound while trying to hold on as long as possible. What homeowners fail accept is that there are very few buyers right now and that there are even fewer buyers with the cash to make the deal happen.

Reality will catch up one day when price and demand meet.

Dow 9000

2009-11-05T10:45:00.004-06:00

The markets have been more volatile as of late. Swings of 200 points have occurred more than once in recent weeks whether it be red to green or vice versa. The result is a combination of technicals running ahead of fundamentals, performance anxiety, fund withdrawal, etc. On top of that, there has finally been a blip in negative sentiment. Economic data coming in is painting a more clear picture. Things aren't as rosy as most want to believe.

I reckon that most money managers have been riding the easy train this year after a disastrous 2008. I bet that most have been late to the party as well and are trying to keep this train moving. But, they're riding on hope and that only gets you so far.

Data was released today showing over 500,000 people initially filed for unemployment claims within the last couple of weeks. Stimulus is being extended. Homes are stuck in an inventory glut. Personal assets are still way down. Small businesses are continually shuttering doors. This is what we are faced with and it's not getting any better.

I expect the Dow to come back down to 9,000 or below before it shots up. That's the call.

Easy Money Made You Lazy

2009-10-30T12:50:00.004-05:00

We've had an easy market for 9 months. You didn't have to think to win. All you needed was a little money and some risk appetite. Everything floated up and up. You just had to buy something. You nibbled and it paid off. You bought more and it rewarded you more. Then you got used to thinking that you couldn't lose.

Well, think again. I've been reiterating the disparity between the stock market and the real economy. We know that stocks price in the economy 3-6 months ahead of time. The rally 9 months ago made sense early on with all the stimulus talks and monetary easing. Then it made less sense during the summer run-up. Now, we're faced with stocks that have appreciated 1-4 fold and the real economy is not any better off than it was at the beginning of the summer. What gives?

Blame will go around the table more than once. There's plenty of it. But, I think it begins with you, the individual. You suffered a horrible 2008, arguably the worst of this generation. You were so down that you were willing to stick with anything that provided a glimpse of hope. After losing so much getting a little back was heaven. And when that hope grew a bit brighter you latched on for good, no matter what.

All the while, it didn't matter that jobs were being lost. It didn't matter that people were going months and even over a year without incomes. You bought a new car just because the government paid for some of it even though you couldn't really afford it. And, you bought a new house, also with the government's aid, thinking it was a good time to buy even though renting provided more value. You may have upped your savings but it didn't hit you that you're debt load was overwhelming. Worst, you thought you'd win against Mr. Market so you plopped some dough on the line and bought Apple, Google, Amazon. Well, let me tell you something...so did everyone else. It's payback time and you're not ready for it.

Making My List

2009-10-18T11:18:00.002-05:00

We know Christmas is right around the corner as the year winds down into the winter months. It certainly feels cold outside already. And, I started making my list last week. No, not a Christmas present list but a 2010 stock list of what I would own if the market allows me. I will reveal some picks over the next few weeks.

No doubt the market has been riding high. Dow 10,000 is a reality. What continues to bother me is that Wall St is celebrating by drinking dollars but Main St is held hostage to unemployment, lower wages, lower asset values. Main St is not healthy but Wall St continues to price in what she expects to be a much healthier economy.

I see no signs of that yet. Companies are still routinely missing top line numbers. Unemployment is still increasing albeit it at a decreasing rate. Banks are still not lending despite historically low rates. Existing banks still wrestle with ugly balance sheets that are riddled with credit issues that only they know of, if they know. The FDIC continues its torrid pace of taking over troubled banks. The list can go on.

Some market strategists have indicated that we're not going to see another big correction this year. The strongest point pronounced is that since the market has run so much this year that those fund managers underperforming will be buying any and all "intraday" dips. Of course, retail traders will in exchange see what they perceive as a strong market. Same old story. Good luck.

Tide Changed; Don't Get Swept Under

2009-09-29T14:01:00.006-05:00

The market's direction is changing. The rally that began earlier this Spring has risen to high levels and have recently become unstable. Traders and investors coming back from summer vacation are once again smelling blood. These are the same folks who brought Mr. Market to his knees and subsequently allowed him to get up a little. Dumb money then wanted him to learn to walk again. He took his first step and then they thought he was in running shape. LOL.

There currently are too many traditional and non-traditional headwinds to have a sustainable economic recovery. It may be true that the financial crisis is subsiding but it is not true that the economic crisis is as well. Not at all. For a real economic recovery we will need growth in three major areas: income, wealth, and credit. We have none of these yet. My best guess right now is that it'll be another 2-3 years before we see any meaningful growth in these categories.

On top of that, what's really bothering me as of late is the upcoming tax regime changes. Of course, I don't know what type of changes will go thru but from all the talks so far we know that high earners will be affected the most. Contrary to popular belief, these folks are not the Bill Gates, Warren Buffett types. No, they are the multitude of small business owners that have put their entrepreneurial hands at work and have put in sweat and blood to grow their ventures to fruition. These are the same folks who offer employment opportunities across America and provide the backbone to every neighborhood. A hit to them is a hit to the Real America.

We'll also have increasing consumption taxes across the board. State and municipalities are equally struggling to acquire funds. We've already seen "bottled water" taxes, "major tourist area" taxes, "candy" taxes, "liquor" taxes, "fast food" taxes...the creativity is boundless. Oh, and what about the "Internet" tax. Ask Amazon if they care.

Property taxes will be revalued...downwards. Governments will be losing another source of revenue stream that's been increasing yearly over the past couple of decades. Anyway, the tax mess is just getting started. Some may say that it's always been a mess, but I would contend that the messy implications are far greater today given the multi-faceted bubble bursts.

Stay awake for this.

FOMC - Nothing New

2009-09-23T21:30:00.002-05:00

Today's FOMC decision pretty much held to the status quo.

Interest rates will remain low. As far as I can see, this will be the case for the next few quarters. We're a long way from any real economic recovery and low interest rates is one way to stimulate or at least help maintain some sort of activity. What's telling is that bank CD rates are pitiful not to mention what measly rate they're paying for your savings account. Awful. I had locked some money into CD's around this time last year at a 1 year term for a rate of over 4% - now, competitive 1-year CD's are barely fetching 2%. Needless to say, I will not be renewing. Moreover, word on the street is that you can't even take advantage of historically low rates because banks still are not lending.

The Fed continues to sop up more residential mortgages. And, it's the ugly kind they're buying - the kind that banks want to rid. Whatever moral hazard we were concerned about is far away in outer space now. Banks continue to dump and trim off excess while we eat their waste and get sloppy in the act. I guess, in theory, we (and I mean the Fed) has an infinite life and can take it's sweet time to get back into shape. No doubt, Gen X, Y and whatever Letter is after that will pay the price. Sad.

The stock market is pulling traders back in. Of course, it's pulling the dumb money now but when Mr. Market goes up 60% in 6 months, how can you resist? It'll keep going up, no? My answer...I'm mostly in cash. I rather sit this one out because I know that real people are still suffering and will be suffering for a long time. The euphoria of yesteryear is very real but tomorrow's struggles are getting clearer and clearer. We may not see the March lows again, but it doesn't mean we steadily go up from here. I rather spend my time and money focusing on better opportunities than speculating at this point.

Gold @ $1000

2009-09-13T12:20:00.002-05:00

Gold's been the go to trade as of late. Most say it's because gold is an inflation hedge. This group of thinkers hold that with the amount of fiscal and monetary stimulus the federal government has dumped into the economy that inflation is just around the corner. The other major faction says that gold is rising above $1000 because it's becoming more valuable against most major paper currencies. This group contends that the Fed and the Obama administration have taken on dollar-negative policies. Either way, the gold bugs are excited.

I think, however, the reality is somewhat more complicated. What we don't hear too often in the media is the concept of the "velocity of money." This is a nuanced concept and I am not prepared to explain it in detail. However, simply stated, it describes the rate at which money in circulation is used for purchasing goods and services. What's happening now is that the velocity is not growing. Because of this, the Fed will continue to print money as long as they think deflation could be a problem. How much more? No one knows. Chances are the Fed will supply more money than is required at some point.

Of course, all this is speculation as the ultimate outcome can only come after the fact. There are so many variables in play that it is impossible to pinpoint with any accuracy. Because the velocity of money is not growing/slowing, I believe we will be in a period of deflation for the next few quarters (bad for gold) before we enter inflation then stagflation (good for gold) to end this massive financial bubble. Gold will experience a roller coaster ride, so it will test your resolve if you hold in the meantime.

Looks Like Summer's Over

2009-09-02T21:11:00.006-05:00

The slow season is coming to an end. Traders are flocking back to the office. I expect a surge in volume come mid-September. After the incessant rally over the course of this summer, I'm ready for some real pricing action. Why? Because I hate a straight up chart. It gives no grounds for support or resistance. We need some hammering around. We need a good, solid correction to come into play.

I'm expecting a 10% correction by November. Don't know when it'll come or how it'll come. I prefer a long, drawn out process as opposed to a 3-day puke fest. I'm looking for crude to come down to $60/barrel. I'm looking for the financial sector to let some steam out after their incredible rally over cooked earnings. I'm also looking for more housing pains. Whoever called the housing bottom obviously has enough cash already and isn't one of the many who are still facing foreclosure or job loss or budget cuts. Real America is still in the process of belt tightening as indicated by the savings rate. I expect that rate to continue to increase.

I'm still overwhelmingly in cash and am happy to take things slower. Yes, I participated in the rally but I did cut out a tad bit early. I don't usually like trading in froth. That's what I see many doing right now. Good luck.

Contrarian Play

2009-08-28T11:40:00.003-05:00

Nokia's released a stream of good news this week. Huh, Nokia? Yes, you remember the once must-have cell phone before Blackberries and iPhones came to market. The company that you thought was Japanese but is really Swedish. Yes, that Nokia.

Nokia was late to the smartphone game and has been losing overall market share over the last few years...in the US. Nokia, indeed, has a strong presence in many countries, but especially in the BRIC countries. Its infrastructure is deep and established and that matters when you bring products to market. I won't rehash what announcements Nokia made this week (search it yourself), but they're pretty exciting. I expect Nokia to remake itself to be a real competitor in the coming years not only in the smartphone game but in the mobile computing space.

Sitting Ever So Still

2009-08-25T21:52:00.002-05:00

I'm bored with the market, especially the last 2 weeks. I've sold down a lot of positions over the course of this rally and have also removed myself from a bunch of others. These days I'm stockpiling on cash. If the market keeps churning higher, I will keep selling. I will keep dumping money into low-rate savings accounts. Yup, I'm content earning 0.5% for now.

I may be bored but I'm still attached to the market. I'm keeping up to speed with daily developments. I'm just not trading. No sniping for me. I'm not even interested in building positions for the recovery. Why? Because I don't expect a booming recovery. I expect a slow, long road to recovery. Thus, I expect opportunities to surface over an extended period of time. Pick and choose type of scenario instead of pile in on whatever and watch everything rise to the moon.

Going to San Francisco next week for some time off. I'll likely bring my laptop this time. I don't expect any pick up in volume until sometime late in September or early October. But, I'll still want to watch.

Overheated? I Think So.

2009-08-20T13:22:00.002-05:00

I've been watching the travel sector the past couple months and have been pretty amazed at how it's pushed higher and higher. I see Starwood and Marriot continue to walk up the charts. I see Priceline, Orbitz and others popping bullishly. I see Hertz and Avis march in the same direction. Then I think to myself, "who's traveling these days?"

I understand that summer vacation usually translates into finding some R&R somewhere outside of your home. I also understand that businesses go on as usual. But, then I think about the housing crash and the jobless situation and the shuttering of so many businesses. These serious issues permeate everyday life and constrict most people and businesses to cutback everywhere they can. You have to be lean.

That brings me back to the travel industry. I think we've been overly optimistic here. I'm watching this closely for short entries. Airlines are consolidating and have been operating on a shoestring. Hotels are heavily discounting empty rooms. Traditional car rental agencies suck for the most part. And, even in a recovery these are the last to cycle thru...not the first.

Mostly in Cash

2009-08-11T17:51:00.004-05:00

We are officially over the half way hump for 2009. Things appeared pretty grim early on as the US economy suffered a major heart attack from the unraveling of several different bubbles. Investors everywhere were skirmish and afraid to take any risk. Main Street folks didn't exactly know what was going on apart from the constant media headlines, except they knew that their net worth had significantly shrunk. But, then came April's stock market rally. The bed-ridden patient was suddenly able to slowly walk again. A couple more months of training and he's off to running 5K's.

That brings us to the present day. I was actively trading early on in the we-are-not-going-to-have-a-depression rally and was cautiously optimistic for a recovery in the very latter half of the year. Now, I'm not so certain. The stock market supposedly prices in future events and the current rally has sure priced in a picture perfect recovery, which I don't think will be the case. My concern centers around the unemployed (including the part-timers wanting full-time positions), the dented personal balance sheets, the cautious business owners, and a hobbled consumer sentiment. These are major headaches for anything more than a bounce-and-reset staircase type of pattern. It's not going to be pretty.

I expect a back-to-the-bad reality market anytime now. It may not happen until after the summer season, but I am now almost certain it will come before the year end. We've run the markets up so far in such a short period (albeit from ugly levels) that we will need a dose of reality soon. The correction may be fast and furious (not enough backfilling creates gaps without support. ). Or it may be one of those that just drags on and on...well, you know how it is since this current rally is of that sort.

Recently, i have closed out positions in FWLT, NUE, C, EMC, MFE, YHOO, ESC, DAL, PRXL, HBC, X, IP, MCD, KO, WFT, SNE, RIO, COG. Most of these were swing positions held over the course of several weeks. I currently have little confidence in any particular sector. Suffice it to say, I am now holding 70% cash and sitting patiently waiting for the next blip.

Getting Rich in a Morbid Economy

2009-07-03T14:10:00.002-05:00

The government informed us yesterday that we're running on a 9.5% unemployment rate. Uh-oh; now what? No doubt, that percentage will creep into double digits in the months and quarters ahead. Brace for it today and, in fact, embrace it.

What do I mean? What I'm saying is that you should re-position yourself as much as possible to profit from the eventual recovery. Some are already seeing green shoots sprouting here and there.

How do you re-position? I can't tell you how. What I can tell you, and what you may have already heard before if you're keen on creating wealth, is that there are three ways to getting rich in the States:

First, owning real estate. Does this still work, you may ask given the recent defiling of homeownership. I can tell you undoubtedly that real estate is still a viable formula. Real estate in its purest form means land. I don't mean the tangible property that sits atop of land but the actual physical parcel of Earth. The key factors in your quest for the ideal piece of real estate should be (1) location and (2) potential appreciation. Obviously, the big hurdle here will be the capital requirements of purchasing prime land. If you're a little short on capital, find diamonds in the rough.

Second, investing in equity markets. Not everyone is qualified to walk down this path. In fact, very few are and those who don't realize this limitation will be in financial ruins sooner than history can document. This is not a get-rich-quick venue. This is not for the faint of heart. This is not for those without desire, commitment, and a voracious appetite for risk. Don't go down this path if you lack any of these traits. But, if you do possess these traits, then explore this option.

Third, owning a business. Out of the three avenues to wealth, this is the easiest one. Ideally, you pick an area that you are interested in and start working on a biz plan. Pick it to death but don't be afraid to put a few ideas on a test run to see if any flies. It may take several years before you reap what you sow but when you do it snowballs. And, to boot, you set yourself up for other ventures that may come down your pipeline. You need to be business savvy or have someone who is to be by your side.

These are tried-and-true paths to riches. Even though we may be in the worst of times since the Great Depression, there are boundless opportunities as ever before. Hit the road.

Ready Or Not, Here It Comes

2009-06-04T12:08:00.003-05:00

As much as I've enjoyed the recent market rise, the activity over the last month have raised my caution level. I am puzzled and at the same time amazed at how we can keep moving upwards due to some highly optimistic expectations. Sure, fiscal and economic stimulus monies are casted everywhere all around the world now, but can we please pause to remember that we are in a recession and that the economy is incredibly weak??

Take a look at yourself - do you have a job; are you saving more now than ever before; have you bought anything lately; dining out as much; enjoying less paid entertainment, yada, yada, yada. The end consumer is strapped and will be so for years to come. Sure we may have a rising middle class in BIC (Brazil, India, China), but we can't rely on them to pave our road to a better economy (they're busy literally paving their own backroads). Let's be realistic, without end consumers buying corporate earnings will disappoint and keep disappointing.

You have to understand that for the last few years, corporate earnings were ramped up because of easy credit. No more is easy credit. Profit margins will contract and companies must readjust - if we're lucky some will stay in business. Financial companies were the first sector to readjust. Now, we're moving to other sectors. Everyone needs to fix their balance sheets, and this process will take a long time.

Charge-offs, write-offs, whatever you want to label these are still to come. Lots of it. Make that, the bulk of it. I'm not talking millions or billions of dollars; I'm talking trillions. Sure, the big-rush-over-the-cliff credit crisis may have already occurred, but we are still free falling down hard. My take, buckle the seat belt and get ready for some rough riding. Stay disciplined.

Brainstorming Matters

2009-04-10T12:37:00.002-05:00

Been using the brain the last couple months. Trying to think of what the future looks like. Where are the next big trends? What will people want to buy and use? Where are the demographics moving towards? What will the world look like 5, 10 years from now? Those are some of the bigger questions that I've been trying to answer. Why?

Mainly, to get an investment edge. Trying to stay ahead of the curve by exploiting the future. Recently, we've heard the term "generational" bottom applied to the stock market. What does that mean? It means that great wealth could be made and that this could be a once in a lifetime opportunity. This time period may create the next JP Morgan or Warren Buffet. There certainly are superfluous opportunities everyday, but getting THE opportunity matters. And we may just be getting that right now.

So, trying to latch on and work the brain for what it's worth. Saving like mad so I have capital to deploy. But, even better is that I'm working myself so that I am ready when the opportunity unfolds itself. That's what I've been doing.

New Light

2009-02-13T09:54:00.004-06:00

Just got back home from a trip out to both LA and NYC. Part of the trip's purpose was to find some r&r but the higher purpose was to seek some inspiration. I found it.

Lately, I've been thinking about starting a business. What exactly I haven't figured out yet. But, there's no denying that the bug is there and slowly it's consuming me. Anyway, the trip to both coasts has provided some fodder for fuel and I'm running with it. I'm going to start off slow but maybe momentum will build and I'll have it up and going in a year or two. We'll see.

I've decided to change this blog a little. Stocks will still be a core focus but, I'm gonna branch out. Thus, I'm going to change my blog title from "Stock Market Musings" to "Stocks and Much More" with the much more focusing on general business and entrepreneurial thoughts. Hope you like it.

Worldwide Slowdown

2009-01-14T14:31:00.003-06:00

Just finished reading an excellent article (http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4343) and it confirms the notion that world economies are suffering the same recession fate. What do you expect? The engines of growth are running away and hiding indefinitely. Yes, I mean real money. Without confidence, not many are willing to open up their wallet and invest for growth. Only the extremely wealthy can afford to accept more risk in these extremely volatile times. Hence, we hear stories about Warren Buffet brokering deals with General Electric, Goldman Sachs, etc. Regular folks like me, we just hunker down and hoard our cash. We safeguard our capital and wait for better times.

Without cash flowing into and thru the system, it is no wonder that the economy is sputtering. The US began its recession over 1 year ago, so historically we're well on our way to recovery. Our European counterparts, however, were 6 months behind and they're about to bear the brunt of their recession. This two-headed monster comprises the West, and arguably is the most important components measuring the health of our world economy. Thus, we're in a stranglehold. We're due for another rough 6+ months as financials continue to shore up their balance sheets. The economic stimulus plans put in place late last year should start to take effect. And the fiscal stimulus should also kick in soon...I hope - c'mon Congress!

Luckily, Latin America is fending off better than it has exhibited in the past. This is critical. Apart from Chindia, Latin America is the next frontier of strong growth. While Chindia is looking at slower growth, they have enough working for them to avoid any prolonged weakness. Latin America is at the center of this worldwide recession cantilever. If Brazil and her cohorts can keep it steady, I think we'll pull out of this slowdown better than expected.

Looking Ahead at a Stealth Recovery

2009-01-01T12:18:00.007-06:00

The new year is here. It doesn't feel much different than last year. A more sanguine look at this upcoming year may bring hopes of a slow economic recovery. Yes, governments worldwide have instituted or will instill fiscal stimuli to stave off the great recession. Yes, lower interest rates may be a boon to struggling homeowners as refinancing becomes a viable avenue. Yes, the credit crunch appears to have loosen just a little bit. Yes, Obama brings new hope to America and to the world, frankly.

But, there are so many more downers. Unemployment is relatively high and affecting morale. Savings rates are low and cash-strapped consumers are in an uncomfortable situation. Corporate earnings are ratcheted down, significantly, and may come down even more. Confidence in the financial system is broken. The list keeps getting longer and longer. Just think of the recent Madoff scandal. Once you open a can of worms, look out!

The picture is bleak. I don't deny that. What I take respite in is just that - the public's perception is in the sewer. We will not realize that things are better until AFTER THE FACT. We are preoccupied and will continue to focus on the gloom-n-doom scenarios. It's just human nature. So, what I want to touch on is that the economic road to recovery will hit us before we know it.

The Fed lowering interest rate was Step 1. The denial is large as so many are crying that "You're already at zero; What? You think you can go negative??" There are other options the Fed can take that doesn't include interest rates.

The economic stimulus package is Step 2. The denial is prevalent as well as many are saying "How much more debt can we take on?" "Obama hasn't thought this thru." Rebuilding America's infrastructure is arguably the smartest way to improve our economic outlook. It also overflows with tangential benefits. Almost too good to be true, in my opinion, if we can successfully role this out.

The resilient American consumer is Step 3. Unemployment is off the recent charts. Personal savings are at the lowest levels in recent history. But, we fail to account for greater wealth distribution, greater asset allocation. People are financially smarter today than 10 years ago. The world is smaller but the opportunities are greater.

The corporate earnings story is Step 4. No one's shopping, so how can companies make money? So many store closings and bankruptcy filings are occurring today. However, there will be a better environment after all this happens as only the strong will be around to cater to us. Mergers and acquisition will come back into play. Innovation and the American entrepreneurial spirit will roar back into place.

Again, these are just some of the "stealth" events that are happening now or will occur in the future. When they happen we will not fully see or accept them. That's just human nature to dwell on the recent past/present and not fully embrace change until after the fact. The recession has been here. We were slow to adopt it. The recovery is probably already here as well. No one has adopted that yet. We wait for data points, but numbers are backward looking at best. I am not proposing that we return to pre-collapse charts; nothing occurs exactly the same as before. I am, however, saying that the road to economic recovery will occur slowly and unexpectedly. When everyone accepts it, we will have missed out if we're not already invested. That's it.

Rest Up

2008-12-29T14:19:00.002-06:00

This past year will no doubt be written in history books as one of the most dramatic years in the financial markets. We witnessed the height of the housing bubble and then participated in the credit crunch. All these events created an environment of distrust and mistrust. This atmosphere persists today. Although the volatility we lived thru in the months of September and October have died down quite a bit, uncertainties galore remain.

What can we expect this new year? The housing situation will slowly work itself out, as demographics and the American Dream and low interest rates will spur interest. The credit crunch is still being crunched - this is a far tougher situation to rectify. However, sooner or later the financials will have to start making moves and when they do things will brighten up a bit. I don't know whether it'll be in 2009 or 2010. Most important, though, is that we should see improvement in the unemployment figures. I expect to see a rebound in the latter half of 2009.

In the meantime, rest up! It has been an arduous 2008. No doubt, we've seen many more low points than high ones. Regroup. Rethink. Reenergize. 2009 will be an exciting year. It could be the year where wealth will be made.

Historic Fed Day

2008-12-16T18:19:00.003-06:00

I can't help but think to myself that the Fed is ahead of the curve this time. In the beginning, one year ago, it appeared that the Fed was slow to act. And when it did act, it was too conservative.

Then the credit crunch/recession picked up steam and the markets slowly started falling apart. And then, of course, all of us remember the October/November days where the market broke down, routinely trading down 400-800 points.

However, thru this period the Fed has acted more and more promptly. Looking back, it was as if Bernanke & Co. were prescient, knowing exactly what they would do given a certain scenario. I don't fully believe it, but their actions over the last 3-4 months have been superior.

Forget moral hazard. Forget inflation. Forget all that stuff. What we're facing today is REAL and different than the past. The jobless claims are meteoric. Banks are still not lending freely. Consumers are not spending, with some reports citing that some are cutting back 50%. Homes are still falling albeit at a less precipitous rate. And this is occurring worldwide. People around the globe are more or less going thru the same events.

The Fed actions will be mimicked over the next few quarters by other central banks. They have to. They have no choice. Their independent economies are NOT as decoupled as these countries think they are. It's almost impossible to think otherwise given the overwhelming market share of the American economy. If America is suffering, so will the world.

Zero rates will benefit banks and ultimately benefit the consumer. In essence, the American economy will be able to work itself out of this recession with the support of the Fed. Obviously, all branches of government will have to kick in. Foremost, fiscal policy will need to address unemployment and housing. Obama's stimulus plan will be key. He's more on top of this than many give him credit. In fact, I think he will perform superbly...how? Under-promising and over-delivering.

I look forward to see America back on its feet. The markets are typically 6 months ahead, so the rally we had today is real. The Fed has spoken and as the axiom goes, "don't fight the fed."

Credit Crunch

2008-12-16T13:19:00.003-06:00

The credit crunch has been with us for a year now and we certainly have felt it. And not just those on Wall Street. In fact, the Main Street crowd is arguably more affected since they are the overwhelmingly large majority.

How have we been affected? For one thing, home prices have fallen off the cliff from inflated levels. That means wealth contraction as most everyone's single largest asset is their home. What else? We've seen massive layoffs by small and big companies alike. That means less stable income stream and thus contracted spending. Furthermore, people are worried. We read about companies going bankrupted. We hear that banks aren't lending. We see our credit card interest rates skyrocket. Panic is literally in the air.

The air of fear is prevalent and heavy. Everyone and his dog (love that phrase) are paranoid that we're entering a prolonged period of recession, if not depression. We hark back to memories of the tech bubble bust and 9/11 and remember the pain, both physical and emotional. Those were trying times.

This time, we're involved with a more opaque subject. Credit crunch. Main streeters don't exactly know what this means. But, get this, it's been with us for a year. During this past year, believe it or not, financial literacy has blossomed. People are more concerned about their finances than ever before and thus are more engaged. All of my friends have talked about the economy, unemployment, stocks, etc. These are folks who in the pass have deferred this topic. And, now, they are engaged! This is great!

It's great because we have involvement. Yes, folks may be decreasing their retirement contribution rates and may have altogether stopped contributing. Yes, portfolios are suffering huge declines. Yes, things are bad. But, the thing is (and this is key!) things will get better. And when this thing turns around, we'll be so much more better than before. I expect a wave of new money to come into the markets. I expect people to be more educated and picky and will not go with the same gimmicky investing/trading they've done in the past. Yes, I do expect a new bull market. And, I for one can't wait.

Bottoming is a Process

2008-12-08T12:10:00.002-06:00

If you're as negative and bearish as you were two months ago, then you're not doing your homework. You haven't been following the news and haven't witnessed the ascension of Obamamania. President-elect Obama is integral to getting us out of this recession. His leadership and plans for, dare I say it, economic recovery are vital to this nation and this world. Obama and his team have been saying and doing all the right things unlike the current administration. They are on top of the game and that will immeasurably aide in the process of the stock market finding a true bottom.

On top of Obama, central banks around the world are lowering interest rates. Don't underestimate the effects of low rates. Governments were worried about inflation (as mandated) a few months ago and couldn't act soon enough to stave off recession. Now that commodities and oils are dirt cheap, there's freedom to act as required. And it is required that rates be brought down to stimulate activity. Banks will be able to make gob loads of money given a certain rate and consumers will be tempted to borrow.

Also, the credit markets are slowly unfreezing. Yes, banks are still extremely cautious about lending to any Joe, and they should be. There remains a chunk of assets on their balance sheets that are hard to price, so capital requirements remain high. Heck, it may even be strategic to keep building a stockpile of dough to buyout struggling competitors in the future. Either way, the credit market is not as bad as it was just two months ago.

Housing prices are more than halfway over with the repricing. No doubt homes were expensive in the past few years. People say there was inflated demand but nevertheless the American Dream of homeownership was being played out - it will continue to be the American Dream in the future. Buyers will come back. I have a friend who bought his first home 6 months ago. There are others like him who will benefit from discipline and necessity. The repricing will allow a new, more financial savvy, bunch of home buyers in the market. And ultimately they will help stabilize and allow real long-term price appreciation. Oh, and let's not forget that low rates allow for refinancing, a boon for many struggling banks - and it benefits the consumer as well.

Many, many more events have happened that has allowed some light to shine thru the tunnel. We're certainly by no means out of the dark yet. Long way from it. But, we're not in hell anymore. Recognize it and act accordingly. History tells us that stock markets bottom six to nine months before the real economy comes back...my best guess right now is that we're bottoming over the next 3 months.

Recession - Yes, Please.

2008-12-03T14:08:00.002-06:00

This week, we were "officially" told that the US economy began its recession last December. I couldn't be more happier. Everyone and his dog already knew it, and if they didn't, well, it doesn't matter. Recessions are marked by negative growth and that translates to job losses, business closures, dwindling consumption, etc. It gets people depressed and businesses scared. But, it is necessary.

Why? Because recessions gives us time to get better, to improve, to innovate. It is during a recession that business need to cut back on excesses and focus on the things that they do really well. They cut down on needless expenditures and hone in on improving efficiencies. As cruel as it sounds, they have an excuse to lay off marginal employees. It gives them a chance to retool their business models that have gone haywire in the money-is-easy days.

More importantly, recessions teach people that a good life isn't a privilege. It is something that must be worked towards and earned. If you're making a $40,000 salary, you shouldn't be living in a $400,000 home. Period. You shouldn't be eating out 5 times a week. Period. You shouldn't be vacationing 3 times a year. Period.

Recessions allow for restructuring. It gives a chance for aligning your priorities again. Scale back on luxury and concentrate on your bread-n-butter. Recessions allow us to get ready for the next up leg in this everlasting quest to move forward with life. Get your business in order for the next round.

Green Energy

2008-11-26T12:22:00.003-06:00

A couple weeks ago, I had the opportunity to meet two execs from an Asian energy investment firm with offices in Hong Kong and Singapore. The chaps were in town to visit a nearby chemical plant that purportedly has new technology of using silicone to create solar energy. Anyhow, these guys were foreigners who spoke English well enough so I questioned them on their outlook.

Both fellows were gung-ho about green energy. They commented on the future expectations of rising fossil fuel prices and lack thereof and that alternative energy is the way to go. Of course, it is their business and it's not too surprising to hear that from them.

But that got me thinking. We may be in a recession right now. It certainly feels like it. But, what about when we move out of this phase? What's going to happen? Are we going to be at an earlier stage, like are we going to be back in 2000 territory? I don't think so. In fact, I'm thinking we'll be building progress in the meantime that will help us explode up higher when we get out of this funk...however long it'll be. I sorta think that we'll see more impressive returns than what we've seen earlier this decade.

Why? Well, BRICs are only in their early stages of industrial revolution. The resources and headcount in these countries are astonishing and if they ever figure out how to harness both, watch out Westerners. Not only that, we will be offsetting their consumption with our own savings during this recession. We will once again have spending power once we get out of this gloom-n-doom stage. Yes, the government will be heavily indebted, but that doesn't change the equation. What's changed is the larger model of STRONGER emerging economies and more BALANCED leading economies. Japan is better now than 10 years ago. The US will be better 10 years from now than today. And the BRICs will definitely be many folds better in 2018 than now.

Watch out. The commodities boom cycle is just resting for now.

Survival Strategies

2008-11-07T09:57:00.004-06:00

Zappos laid off 8% (about 135 people) of its workforce yesterday; the first firing in almost nineyears. Letting go of people is always hard and often psychologically damaging to remaining employees. What this tells me is that even a first-rate company is experiencing softening demand, so watch out below!

If you've ordered from Zappos before, you know their website is better than average. You will also know that they have a hugh selection of shoes that is unrivaled on the web or at your local brick-n-mortar. They also use 3-day shipping and offer free shipping both ways. Moreover, their customer service is excellent, best-in-class across any industry.

I've seen the recent layoff headlines, but none really caught my attention as Zappos did. This was a small startup that grew into the largest profitable online shoe retailer. It is still privately owned so I imagine that the entrepreneurial atmosphere is still very vibrant. To see that even they have to handout notices is disappointing and sad. They may have hired too many people or the more realistic reason is that the economy really is that bad.

Zappos is preparing to weather the storm and the best internal way to preserve capital is to reduce the expenses, and frequently the largest expenses, on your balance sheet. This also spells to me that the credit markets are really disturbing businesses that are in expansion mode no matter profitability. Zappos must be worried about raising funds in the open market and so took steps to reduce cost.

This may turn out to be a worse recession than many currently think, including me. I will keep my eyes open going forward for further tells to this market.

Readying Buy List Again

2008-11-06T14:56:00.002-06:00

The last two sessions have once again provided another opportunity to go long. Here's what I'm thinking. I think we're in a trading range up until the next GDP numbers are released - that puts us into early next year. So, going forward until that point in time, I'm going to trade with that thesis (unless, of course, something big unexpectedly befalls us).

We're retesting support levels again and will probably run up against it tomorrow after the jobs report is released. Feels like the sellers/liquidators are out in full force yesterday and today, although not as bad as in prior weeks That's a good sign as maybe they're finally exhausted. But, also, it gives a chance for cash-rich funds to start rebuilding positions for the coming year.

I'm rebuilding my long-term portfolio, but I'm also wanting to trade a little in this time frame. Remember, my long-term portfolio consists of stocks that are value oriented, head of the class, wide moat, etc. types of companies. Lately, I've been employing wide scales. Also, I'm looking 3-5 years out so I will ignore a lot of noise that comes and goes.

In terms of trading, I usually like momentum, high-volume type stocks. These are stocks with lots of noise. I'm usually holding a couple hours to a couple days. Not necessarily scalping but a 4% profit is sufficient. I take stop losses on these seriously.

Long Road Ahead

2008-11-05T09:14:00.002-06:00

The Obama win yesterday was a step in the right direction. We have put hope and confidence back in the equation. Believe it or not, psychology has a huge role in our journey back to financial stability. It cannot be underestimated.

Now that we have the right leader in place, we need the right advisors in place. We will have to continue to hope that the right Senators are elected, the right cabinet members are appointed, and right Treasury heads take office. This process will take time and time is what it takes to put in an underlying structure that helps fix the current financial ills. In time, confidence will come back.

I don't expect any dramatic announcements or changes to take place within the coming weeks. I do expect something to come to press within the coming months that will show to the world, and more importantly, to Americans of Obama's economic policy changes. Again, restoring hope and confidence is the key. We need Americans to believe in a future worth obtaining.

The "Confidence" Factor

2008-11-04T11:20:00.006-06:00

Politics aside, an important result of this presidential election will be a rising in confidence levels. The American public will undoubtedly experience much greater levels of hope, perhaps even doubling the low levels of our current administration. If Obama is elected, we can probably expect to see even higher marks since he can rally and electrify crowds.

The rising confidence factor should not be underestimated. As a nation, we have been bogged down by pessimism for a very long time. People are looking for hope. People are looking for someone to lead. People are looking for something to latch onto. A president with a strong purpose and clear vision will instill confidence in a searching public.

Regardless of your political stripe, a confident leader will rally public spirits...and the market.

Companies Still Believe in China

2008-11-03T11:08:00.004-06:00

China's still the place to be. Just look at PepsiCo's announcement today of its $1 billion investment in China over the next 4 years. That's a big stamp of approval from one of the best beverage and food giants, no, make that one of the best run companies around.

PEP's been in China for almost 30 years already. They're not exactly new to the scene, so by making this strategic investment PEP must recognize opportunities. At the very least, PEP is deploying money that it could've used to repurchase shares or boost its dividend...this tells us that PEP's expected rate of return of its China investment is higher than either options.

Obviously, it helps that PEP is one large company that has the wherewithal to spend a chunk of money on market research. The key will be in finding out what products appeal to the Chinese - Frito Lays may not do as potato chips are not a snack food staple in Chinese diets. It would not surprise me that PEP will spend some of that money buying into an already established Chinese company...as KO is attempting with its bid on a Chinese juice maker.

Giving yourself 4 years to invest $1 billion is a nice, tight timeframe to work with since by then the credit markets should be thawed. China's middle class should be more established than it is in today's jittery market. And, PEP should have a better sense of what China needs and fill that need.

Be Wary of Cash

2008-11-01T14:09:00.000-05:00

Cash is not really a good investment. The time to be in cash was 1 year ago, before the stampede of declines. Those touting to be in cash right now may be late to the party. We're already 1 year into the market declines, and if recent history is a good indicator, we're already passed the halfway mark for this decline. Obviously, what we've experienced thus far isn't the same, but history still serves as a guide.

History tells us that markets bottom 6-8 months before the real economy recovers. If the bottom was set earlier this month, then we're looking at late spring 2009 to mark the end of the recession. That's two quarters from now. And, it also means that we're going to see ugly GDP numbers, probably first with a negative revision to this past quarter's figure and then a weaker 4Q number. The kicker should be a disastrous 1Q09 figure. Unemployment numbers should also keep rising with the tide. Watch for these tell-tale data.

But, what I'm really getting at is that you (or your money managers) should not be hoarding cash anymore. Instead, you should be slowly deploying that mound in the coming months into recovery opportunities. Next week should witness a retracement and those who defy the trend and lead us out of that could possibly well be the leaders of the next primary bull market. Cash should be invested precariously over the next few months in these names. Just don't get too comfortable sitting on cash right now.

RIMM's Not Dead

2008-10-31T11:56:00.004-05:00

The biggest worry about RIMM today appears in the daily headlines. Layoffs. We know that white collar workers rely on their Blackberries to get thru their day. We also know that there continues to me massive layoffs across industries in professional firms. Yesterday, we had AXP announce a 10% chop. Today, we hear ERTS cutting. Law firms are downsizing. HRB is cutting staff. And we all know about the demised financial institutions as well as the job losses at the survivors.

I don't know which companies actually use Blackberries, but let's assume that these companies in fact use them. That means about 10% of RIMM's corporate accounts will be shuttered. Let's play this out. If a laid off worker's phone was provided for by his employer, then he'll likely have to return it when he departs. So, now what? Is he going phone-less? No. What's likely to happen? He'll likely buy the newer version of his returned phone and continue his Blackberry usage. What does that mean? It means that the retail market for RIMM should be expanding at a similar rate as the shrinkage of its corporate accounts.

The only other feasible option is to flee to AAPL. I don't think the trade down mentality exists for RIMM users. Once you've experienced the many advantages of Blackberries, you're willing to pay an extra premium (albeit small in absolute terms). I believe RIMM's user base will actually find little deflection despite the headline layoffs. Ironically, retail accounts should be blossoming this quarter. There's a strong bid underneath RIMM heading into its Bold and Storm debuts. RIMM is still the leader in smartphones.

Retooling Balance Sheet

2008-10-30T10:17:00.002-05:00

Consumers are in the process of adjusting their balance sheets. Given the swoon we've seen in home prices and stock prices, we now know that the average consumer is down 20-40% this year alone. To have that much lopped off of your bottom line is painful. Your confidence is in crisis mode and you don't trust any asset class. So what do you do?

You start saving. And I mean saving cash. You're not buying equities, real estate, or anything investable. You're not buying anything because you're not in a rush to buy. You worry about unemployment and about slowing GDP growth. You are extra cautious. You don't want more debt. So you ramp up your savings account and raise your savings rate.

This in part will help us out of the recession, but will also delay the new day. The bear market may not last as long as you think, but there also will not be a roaring bull market any time soon. Volatility should remain somewhat high since we're in unchartered territory. Stock indices will likely reflect little growth but individual stocks can show significant growth. I see us teetering like this for as long as 2-3 years.

Bottom line - we're an enormously wealthy country blessed with one of the most stable governments and a robust financial system. If consumers hunker down and start saving more, we'll be in a period of hibernation. But, they will wake up one day.

Bargain Hunter

2008-10-29T10:09:00.002-05:00

This is a deadly market. We move up or down hundreds of points in a matter of minutes. We're seeing double digit percentage moves on a daily basis. This market sucks - if you're on the wrong side of the trade.

To beat this market in the long run the key is to seek out companies that present real value. You need to analyze their assets against their liabilities. You need to familiarize yourself with their future growth and earnings potential. You need to dig deep and discover their potential pitfalls. You need to find their cash value.

Some stocks that I've been investigating: ASH DE EMC PFE TASR

Have the Courage of Your Knowledge and Experience

2008-10-28T12:01:00.003-05:00

Think about the 5-year growth stories. What are the next big hits? What are the big needs of the world? Search for themes and look for bargains in the current environment. Will the stock market stop crumbling? I don't know. But, one day it will stop and the markets will go up. When that day approaches, it's best to have a game plan already in place.

Web 3.0 ideas? Cloud computing. Netbooks. iPhone for $99. Virtualization.

Green ideas? Solar. Wind. Water.

Demographic ideas? Baby boomers retiring. Rising BRIC middle class.

Keep brainstorming.

It is well known that Warren Buffet takes less than 15 minutes to make an investment decision. When faced with a decision, Buffet relies on his knowledge of history and past experiences to make the call. We want to emulate Buffet in this regard.

Consolidation, We Need You.

2008-10-27T10:35:00.006-05:00

Most everyone is looking for some kind of capitulation, some kind of event that will mark the bottom of this decline. But, what I want is some sort of consolidation. We need to start holding the lows and stop dripping lower by the week. We need to re-test the lows and maybe even re-test it again. This churning action will provide some backbone to work off of towards a stronger market. At the minimal, it'll decrease the fear factor and volatility that has reached all-time highs.

We need calmer waters. We need to get investors back to focusing on the fundamentals and growth factors and to stop almost exclusively focusing on recession or depression or the end of the world. That kind of thinking is unproductive at this point. I say this because so many solid companies are trading at such value centric levels not seen in recent years. And the kicker is that these companies are so much better (operations, profit, scope, etc.) than five years ago yet their ticker is below the print of that same time. Ridiculous.

As mentioned before, forced selling/liquidation is a major cause of this dislocation. But, also retail investors are selling in droves as well. Not only that, they are also standing on the sidelines via not contributing money into their 401(k)'s, IRA's, etc. "Why put money in a poor stock market?" Ironically, a poor stock market is when you want to invest. You want to buy low and sell high...REMEMBER!?!

My advice, and it goes hand-in-hand with the consolidation that I'm awaiting, is for investors to step-in and take advantage of this decline. Slowly and periodically invest...keep those 401(k) and IRA contributions steady. This will allow you to benefit over time and also help form a market base.

Outsmart This Market

2008-10-24T11:46:00.002-05:00

Is that possible? To outsmart the market? Probably not.

I am an investor by and large, so I have recently started to build longer-term positions. My strategy is to nibble. But note that I have only been buying in lots of 1/5 - 1/10 of my full position. That means I am expecting to make five to ten buys to fulfill my position size. And, that also means I expect the stock to fall some more. How much more I don't know. But, my scales can be really wide. I'm not trying to time the market's bottom, but there are some strong companies that I want to own and believe will be stronger when we come out of this financial maelstrom. Fundamentals, in the end, matter.

When the smoke clears, growth and earnings will count again. Find companies that are strong in both areas and you will be rewarded. Obviously, seeing red marks day after day on your screen doesn't help your psychology, but having stamina and determination today is important. The forced liquidations will stop one day, the volatility will die down, the negative sentiment will turnaround. Know that this period in time is a once in a lifetime opportunity. We are seeing stocks getting beaten up really, really bad. Smashed! Dislocations may continue for a while longer, but it will end. I'm investing for that day.

Volatility Remains

2008-10-23T13:08:00.002-05:00

This market action is still way too erratic. The negative sentiment is screaming out loud. And the bears are still pounding the market tickers down every minute. It's scary that we take out lows so quickly. Where's the support? Where are the dip buyers? Where are the value hunters? Where are the big money sidelined players? Sadly, it looks like everyone's standing still and just too afraid to make a move.

Until we get some stability, until the market stops free-falling...we're just going to see a sea of red on our screens. It's hard to imagine what will get us out of this stance. Everyday the selling keeps up. Everyday new lows are printed. My targets (already set very low) for stocks I'm watching are taken out in droves. When I think a stock is cheap, it gets cheaper.

The redeeming point, once again, remains that there is tremendous value out there. I'm practically salivating over a bunch of companies I want to own. My advice...keep watching and keep alert as to what companies you want to own when this massacre ends. Look for the leaders and hop on. Keep your head up and stay in the game. We're bound for calmer times.

Mean Reversion

2008-10-22T13:43:00.000-05:00

Stock markets tend to migrate back to the mean every few years. We had an incredible ramp from 2003-2007 that propelled the DJIA to eclipsing 14,000. Stories of the greatest housing boom, BRIC growth, ag shortages & energy conundrums were headlines every single day. Traders and investors alike took to the frenzy and helped create one of the best 5-year stretches in recent memory. Even mom-n-pops wanted to become realtors.

And then the bust. It took only a year to bring us back to prints we last saw a decade ago. The momentum fizzled and paper wealth destroyed. More important, the US financial system changed. We lost Bear, Countrywide, AIG, Lehman, Merrill, WaMu...and so many more. Goldman and Morgan are traditional banks now. We need government intervention and look forward to foreign support. We can't stand on our own two legs. It's a sad, sad time in American history.

I imagine that we still have a little more falling to go. Maybe by the end of 2009 we'll learn to crawl again. And then walk in 2010 back to the mean. But watch out 2012...we'll be jogging and then by 2016 it's marathon time. And you know what happens from there.

AAPL Revisited

2008-10-21T17:12:00.002-05:00

AAPL smacks the bear on its face.

Amazing resiliency considering the current economic turmoil. And what sandbagging!! Looks like the big AAPL's got things under control. With a strong lineup heading into the holiday season I continue to expect solid numbers from this growth monster.

Remember, we're still in the early chapters of both the Mac and iPhone stories. The Mac is winning hordes of next generation users (i.e., anyone attending school and looking for a new notebook) who will become tomorrow's workforce. This means that the commercial side of the application is still vastly untapped. Sure, Mac's have been the workhorse for creative and high-style shops for many years now, but I can't wait to see a glowing apple on the desk of your accountant, lawyer, insurer, etc. That's when the Apple story peaks. But, until then there's a long, long road ahead.

Oh, did I mention that the iPhone was just introduced a little over a year ago? The same growth story holds here, maybe even scarier.

Basing Action Never Feels Good

2008-10-21T11:39:00.002-05:00

We're trying to find some footing here. After the treacherous decline of the past few weeks, it will take some time to patch the road to recovery. Don't expect a V-shaped bounce but instead look for a combination of "W" and "M" patterns over the next several months. If this happens, it will be promising.

We need to build a solid base for stocks to work up from. We need to get ready for 2009. We need to see backing and filling to create strong support levels. This action will rid any doubters and those who just want to make a quick buck. Volatility necessarily has to come down and the trading atmosphere has to be boring. When this happens, we will be there.

At that moment, things will slowly creep up week-by-week. You'll see earnings estimates stop going down and upgrades handed out. But, that's too far in the future to talk about right now. All we want now is some churning action. No more big surprises is good for this market.

China GDP Growth

2008-10-21T00:47:00.004-05:00

Saw a report today indicating that China is growing at "single" digit rates for the first time in recent memory. Boo-hoo. Any country sporting a 9.9% growth rate is nothing to sneeze at. That's still a torrid pace. Let's not forget that China's experiencing its industrial revolution this decade and that's likely to continue into the next one.

China just woke up after slumbering for the past 50 years. It has a lot of catch up to do. Its coffers are filled with vast amounts of money and will rightfully deploy them as the century progresses. The rising middle class will continue to demand a better quality of life and so companies will continue to find opportunities to sell and serve. With close to 1.5 billion people, there are unthinkable opportunities to be seized.

The 9.9% rate is all relative. The Chinese stock market has corrected over 50% during the past few months and although the stock bubble has bursted the growth that the country experienced is real. The paper money may be lost but the real money is still around. It's not too far-fetched to conceive that double digit growth will resume in a year or two...or maybe even sooner. With China, you have to expect the unexpected.

AAPL - The Telltale Ticker

2008-10-19T14:44:00.002-05:00

Apple was the one stock that was holding and ramping on the incredible reversal day last week. This was the one stock that the bulls were propping up to make their statement. They succeeded.

This will be the stock to watch for again this week. Apple's reporting earnings after the close on Tuesday. Look for strong iPhone and Mac sales with steady iPod numbers. More importantly, hone in on the guidance - this is key! Google slapped the bear market on its face last week. We need Apple to smack it on the face one more time.

I did my part last month and picked up a Macbook Pro alongside an iPod Touch. I'm rooting for you, my beloved AAPL.

Successful Retest?

2008-10-18T11:52:00.003-05:00

Last week's action felt like we've put in a tradable bottom for this year. We hit the low point two Fridays ago and retested it midweek. If we can get a little more buying action early next week then volatility should go down and a base should form from which we can rally into year end.

The combination of uncertainty and forced liquidations have created an air of fear and panic. No one has a good idea of when the market will stop falling as most every market pro thinks it's time for a reflexive bounce. But, day after day we get more and more selling. When we do get a pop up on the indices the market doesn't hold it up but instead pounds and sells it into the closing bell. It's erratic to see so many stocks let alone market indices make 5-10% moves in one trading session. All this has created a trader's paradise, but for those who are longer term investors it's pretty grim when you check on your portfolio and see monster percentage declines.

So what should investors do now? For one thing, they should ignore the headlines but, more importantly, start thinking how they can profit from such crazy dislocations in the market. Start pondering what the future will look 5 years from now. Do you think the US will remain globally competitive or will the BRIC countries stampede over the western hemisphere? Do you think the USD will remain weak given the huge cash infusion the government has promised (and may promise some more) the economy? Do you think that multi-nationals with strong balance sheets can continue to take share in foreign markets? Do you think the entrepreneurial spirit of Americans will somehow break thru with new technology, new ways of doing business that will create value?

Some companies I'm observing: MCD, KO, SBUX, TASR, DE, AAPL, RIMM, FWLT, NOV, ZMH, DEO.

Finding Opportunities

2008-10-17T14:38:00.001-05:00

Now is the time to find opportunities. I don't now what 5, 10, 20 years out will look like but given our market history things should be much better than it is today - we can be knocked down but we always come roaring back stronger than ever.

What we're experiencing today is a great leverage unwinding...financial firms are selling, selling, and selling more. And this has caused great panic. Many financial firms have gone bust and lots are being speculated as going bust.

My take...endure some short-term pain for longer term benefit. The stimulus (or bailout, depending on your perspective) package will help the economy, maybe not today but it will have an effect sooner rather than later. And the forced selling will stop, maybe not today but it will sooner rather than later. Be selective. Pick and buy only those companies that will weather this financial meltdown...and buy with big cushions - we're not rocketing back to Dow 14k anytime soon. Remember, this cold be the once in a lifetime opportunity for Gen X'ers, including myself.

Warren Buffet seems to agree.

http//www.nytimes.com/2008/10/17/opinion/17buffett.html?em