I found this article on CNBC.com just now
http://www.cnbc.com/id/28352084
and it makes me increasingly bullish on common stocks for the coming year. Why? The headline screams that 2009 may not be a good year for stocks. That, in its essence is why I like stocks. As I have mentioned, as long as the fundamentals are okay for a particular issue, I WANT everybody to be out of a stock when I purchase. When everybody is bullish, then by definition, more people will be believing in stocks, therefore, will be driving the price up.
If all of the pros are bearish, then by definition, then they will be out of stocks. That is precisely what I want.
Don't get me wrong, I think that 2009 will be another bad year for a lot of issues - but not all. And the ones that come back strong, the ones that have already been beaten up but will survive, should come back.
I love the financials like BAC, XLF, WFC, C - they are all down at least 40% on the year. They pay good dividends and are survivor names. With BAC selling at $12 and change at one point today, I love that stock.
Again, I am not a professional, do not follow me. Do your diligence, but my main point is that when EVERYBODY was saying that we were not in a recession, and history (and market leaders now) agree that we clearly were, did that make it so? I think not. At the same time, now that the safe bet is to jump on the "no stocks will ever be good again" bandwagon - the same people are now running this headline. And I am hopeful that history will show this to be, once again, just a clear case of groupthink and lack of willingness to go against popular sentiment.
Months ago, after a particularly brutal day, the Dow down 900 points - the market pundits were all sitting around looking at each other saying "you throw in the towel yet?" and calling capitulation - that is nowhere near. Two more months and two more months of brutal volatility - and now everybody is done asking. They are talking about survival, and what to invest in now that there is no chance of making money in stocks. Now that my friends, that MAY be capitulation.
I generally look at capitulation as when the only buyers are the institutional bargain hunters. The value guys that got thrown out of their jobs when the momentum guys took over. Now that the momentum guys are looking for jobs, the value players are sifting through the rubble looking for bargains.
That, combined with the all negative headlines makes me hopeful that the end is near. And not the end of stocks and finances as we know it, but the end of the pain that has been slowly pulling us apart for the past three quarters or so.
I just have to shake my head and remember back to Q407 when the "industry brains" were calmly reassuring - the "subprime losses are well contained and the US economy is in great shape, and we remain extremely bullish over the next three quarters"....
Now that they are saying that it's a bloodbath here on out, I have to smile and hope that my BAC, XLF, etc. positions come back strong!
Good luck all - and remember, don't make investment decisions based on my rantings. Do your diligence, seek professional opinions, and use your own judgement. Good luck.
Mr. Boo.
Tuesday, December 30, 2008
Saturday, December 27, 2008
Globalization - Friend or Foe?
As an investor in American equities, I have always taken comfort in the saying "American economy catches a cold, the world economies catch Pneumonia" - this has always told me that our collective standard of living (here in the US) is relatively certain to be maintained. And, that as a recovery begins, my domestic holdings should, at least in theory, enjoy a much quicker return to their original values.
However, as an investor in XLF, BAC, JPM, AXP, C, KO, and many other holdings with a global reach, I have to ask myself. Is globalization a good thing or bad? On the surface, the answers always jump out. Yes, it is a great thing. It gives us the ability to expand into new markets, with often times higher margins and escalated growth rates. It also gives the ability to entrench in some markets where advertising, and other costs of doing business are lower. It allows for the development of goodwill and reduces (for goods companies) shipping costs. However, some major concerns lurk just under that glossy surface.
Companies doing business internationally are now prone to local issues - governmental uprisings, negative US public sentiment, political instability (when leaders get replaced) and other powerful influences. Also, we face currency devaluations. As the world struggles to gain traction to get over their pneumonia, there can be increased local taxes, weaker currencies, strained labor markets, increased tariffs, etc. Magnify this across across the globe, with each region prompting different responses, at different levels, to different problems, and one can only imagine how difficult this would be to manage.
Risk management departments can be diligent, efficient and proactive, but if the scenario were challenging enough, it can cause major issues.
ALL OF THIS IS JUST MY OPINION.
I am trying to weigh the value vs. risk of these newfound markets. Also, as a long time investor in financial stocks, I am well aware of the issues in catching problems within a company. These often go undetected until the problems are way out of control. And, as witnessed with Bear Stearns, etc. this can happen literally in days. The finance, investment banking companies rely on confidence, and once that goes, the business can literally go - away.
Again, just me rambling.
Back to the question at hand though. Is it really worth it? Are these new, semi-untapped markets really that valuable to American business? I have to say no. I can understand that investors, myself included, want to see strong sequential growth. Of course. But, not at the expense of that blissful security we feel by being in the US. With the laws in place here, some of the strictest around, we still get tooled by unscrupulous business people. We still get duped into believing that an investment house is being prudent with our monies as investors, when we find that they are so far leveraged, it would make a Vegas pit boss cringe. We still get ripped off. So, how can we think that we would do any better in other countries.
I know that as a US Publically traded company, the top management is from the US - I get that, but in order to truly do business internationally, it is imperative that the management is localized. Often times that localization can come at a price.
I am not saying that non US managers are bad - not at all. But the standards and ethics abroad can sometimes be less than par. And with the status of current affairs, I do not want to leave anything to chance.
Good Luck All,
Mr. Boo 1031
However, as an investor in XLF, BAC, JPM, AXP, C, KO, and many other holdings with a global reach, I have to ask myself. Is globalization a good thing or bad? On the surface, the answers always jump out. Yes, it is a great thing. It gives us the ability to expand into new markets, with often times higher margins and escalated growth rates. It also gives the ability to entrench in some markets where advertising, and other costs of doing business are lower. It allows for the development of goodwill and reduces (for goods companies) shipping costs. However, some major concerns lurk just under that glossy surface.
Companies doing business internationally are now prone to local issues - governmental uprisings, negative US public sentiment, political instability (when leaders get replaced) and other powerful influences. Also, we face currency devaluations. As the world struggles to gain traction to get over their pneumonia, there can be increased local taxes, weaker currencies, strained labor markets, increased tariffs, etc. Magnify this across across the globe, with each region prompting different responses, at different levels, to different problems, and one can only imagine how difficult this would be to manage.
Risk management departments can be diligent, efficient and proactive, but if the scenario were challenging enough, it can cause major issues.
ALL OF THIS IS JUST MY OPINION.
I am trying to weigh the value vs. risk of these newfound markets. Also, as a long time investor in financial stocks, I am well aware of the issues in catching problems within a company. These often go undetected until the problems are way out of control. And, as witnessed with Bear Stearns, etc. this can happen literally in days. The finance, investment banking companies rely on confidence, and once that goes, the business can literally go - away.
Again, just me rambling.
Back to the question at hand though. Is it really worth it? Are these new, semi-untapped markets really that valuable to American business? I have to say no. I can understand that investors, myself included, want to see strong sequential growth. Of course. But, not at the expense of that blissful security we feel by being in the US. With the laws in place here, some of the strictest around, we still get tooled by unscrupulous business people. We still get duped into believing that an investment house is being prudent with our monies as investors, when we find that they are so far leveraged, it would make a Vegas pit boss cringe. We still get ripped off. So, how can we think that we would do any better in other countries.
I know that as a US Publically traded company, the top management is from the US - I get that, but in order to truly do business internationally, it is imperative that the management is localized. Often times that localization can come at a price.
I am not saying that non US managers are bad - not at all. But the standards and ethics abroad can sometimes be less than par. And with the status of current affairs, I do not want to leave anything to chance.
Good Luck All,
Mr. Boo 1031
Wednesday, December 24, 2008
Interesting Article on Leveraged ETF's
I found this link on leveraged ETF's and I found it interesting. Especially about the short fund leveraged ETF's.
http://biz.yahoo.com/seekingalpha/081224/112167_id.html?.v=1
Feel free to take a look and let me know your thoughts.
Good Luck,
Mr. Boo 1031
http://biz.yahoo.com/seekingalpha/081224/112167_id.html?.v=1
Feel free to take a look and let me know your thoughts.
Good Luck,
Mr. Boo 1031
Automakers and Other Commodity Businesses
Automakers and Airlines. I just don't understand how people can invest in them. Sure, I understand that GM, Ford, Chrysler, Toyota, Honda, etc. are household names, and that I don't see America moving away from the car culture anytime soon, but it's just that the economies behind these businesses are so tough.
It is just brutally hard to make a buck.
The cost of R and D, upgrading manufacturing plants, and especially labor (with unionized labor) is just brutal and seemingly never slows. And, the efficiencies of scale needed in order to turn a profit make it mandatory to judge demand well in advance of production. If I misjudge the number of vehicles needed I either do not produce enough - leaving too much money on the table or I produce too much and even worse, I have to sell off my inventory at less than attractive prices.
Either way, the cycle of boom and bust is just too difficult.
When automakers start to do well, they expand rapidly, make huge investments in the production and supply processes and increase their workforce. Once this prosperity hits, the union leaders see this and go back to the table, often holding out for large increases in wages and benefits for their workers. This locks the automakers into an expensive cycle that can be a death sentence when the demand slows.
Next is the commitment needed to release a new model.
In order to have popular vehicles, the automakers need to keep releasing new designs. Each new design requires years of research, specialized engineering and obviously production. Marketing is another hugely important and expensive cost. The need to keep moving ahead is a perilous one.
Lack of innovation is a virtual death sentence. Look at the US automakers in the early to mid 80's. With stale releases from Ford, GM, Chrysler, etc. the auto industry was on the verge of collapse. Nobody wanted to buy domestic.
All I am saying is that the fixed costs associated with the auto industry, the need for constant and costly innovation and a very fickle (and sometimes cash strapped buyer) make this one investment I would never make.
The same applies for the airlines.
With uber expensive aircrafts they have to purchase, high labor and fuel costs, relentless fare wars, etc. - they are in the same constant battle as the automakers. The need to control costs whenever possible without giving up needed expansions to take market share - that is a difficult challenge. Unionized labor plays a major part here as well.
Now, on the flip side of this....
I love the companies that are so well branded that the consumers DON'T want the product to change. Take Coca-Cola for example. Their product doesn't change. It did once, back in 1985 and the consumer was outraged. So much actually, that they changed back to the "Coke Classic" which was another home run.
Snickers Bars, Wrigley's Gum, etc.
Cigarette producers, love em or hate em, are great businesses too.
Contrast the automakers, airlines, etc. with these cash cows and the choice seems simple to me. I will never invest in the autos or airlines. Only potential exception is Southwest Airlines, symbol LUV. They seem to have a good model worked out and a profitable niche that keeps expanding.
I am not saying that I will for sure, but it is a lot closer than any of the other dogs mentioned in the autos and airlines.
Once again, don't invest (or not) based on my ramblings. This is just a blog of ramblings from somebody who loves the market and the process of investing. I am not a professional and suggest that anyone do a ton of diligence before putting down cash!
Good Luck,
Mr.Boo 1031
It is just brutally hard to make a buck.
The cost of R and D, upgrading manufacturing plants, and especially labor (with unionized labor) is just brutal and seemingly never slows. And, the efficiencies of scale needed in order to turn a profit make it mandatory to judge demand well in advance of production. If I misjudge the number of vehicles needed I either do not produce enough - leaving too much money on the table or I produce too much and even worse, I have to sell off my inventory at less than attractive prices.
Either way, the cycle of boom and bust is just too difficult.
When automakers start to do well, they expand rapidly, make huge investments in the production and supply processes and increase their workforce. Once this prosperity hits, the union leaders see this and go back to the table, often holding out for large increases in wages and benefits for their workers. This locks the automakers into an expensive cycle that can be a death sentence when the demand slows.
Next is the commitment needed to release a new model.
In order to have popular vehicles, the automakers need to keep releasing new designs. Each new design requires years of research, specialized engineering and obviously production. Marketing is another hugely important and expensive cost. The need to keep moving ahead is a perilous one.
Lack of innovation is a virtual death sentence. Look at the US automakers in the early to mid 80's. With stale releases from Ford, GM, Chrysler, etc. the auto industry was on the verge of collapse. Nobody wanted to buy domestic.
All I am saying is that the fixed costs associated with the auto industry, the need for constant and costly innovation and a very fickle (and sometimes cash strapped buyer) make this one investment I would never make.
The same applies for the airlines.
With uber expensive aircrafts they have to purchase, high labor and fuel costs, relentless fare wars, etc. - they are in the same constant battle as the automakers. The need to control costs whenever possible without giving up needed expansions to take market share - that is a difficult challenge. Unionized labor plays a major part here as well.
Now, on the flip side of this....
I love the companies that are so well branded that the consumers DON'T want the product to change. Take Coca-Cola for example. Their product doesn't change. It did once, back in 1985 and the consumer was outraged. So much actually, that they changed back to the "Coke Classic" which was another home run.
Snickers Bars, Wrigley's Gum, etc.
Cigarette producers, love em or hate em, are great businesses too.
Contrast the automakers, airlines, etc. with these cash cows and the choice seems simple to me. I will never invest in the autos or airlines. Only potential exception is Southwest Airlines, symbol LUV. They seem to have a good model worked out and a profitable niche that keeps expanding.
I am not saying that I will for sure, but it is a lot closer than any of the other dogs mentioned in the autos and airlines.
Once again, don't invest (or not) based on my ramblings. This is just a blog of ramblings from somebody who loves the market and the process of investing. I am not a professional and suggest that anyone do a ton of diligence before putting down cash!
Good Luck,
Mr.Boo 1031
Sunday, December 21, 2008
When the Bandwagon Gets Full...
Doing some surfing of the financial sites, I am bombarded with grim reminders of how bad the current economic state is. Bankruptcy here, retrenchment there, layoffs, early earnings warnings, etc.
The news is terrible.
However, every big drop I have ever seen in the financial markets (and trust me, I have seen a few...) has gone like this.
1.) The economic indicators are all turning down, but the press is still bullish.
2.) The economic indicators are still falling, and the press is even more bullish than before.
3.) Things start to fall apart. The press says we "may" see some softening.
4.) People are laid off, the market is tanking and the press says, we are seeing "softening" but not anywhere near a recession.
5.) The markets are pounded. The average person on the street is seeing real impact to their wealth and the government and press recognize that a "recession" may be here. This is where it starts to get interesting.
6.) Now, the media is all jumping on the bandwagon (or badwagon) saying that the US is done, the rest of recorded history will be that of horrible famines, destruction of wealth and utter doom.
7.) We see very strange patterns. We see huge drops in the market on light volume. The small investor is getting hammered as the market makers "shake the tree" to part the individual of their shares for pennies on the dollar.
8.) The downgrades pour in from top names in banking. All the while, the major institutions are doing some buying. As the individual runs for the hills out of fear, the big players are gradually loading up.
9.) By now, the same poor schmucks who decided to get in and "play the market" have gotten shaken out, vowing "never to buy another stock again" and how Wall Street is so unfair, and how the world is collapsing.
10.) The institutions and big investors are still buying.
11.) The pain is still all over the media. Those perma bulls from before are now superbears and vow that "this time it's different" and it's never coming back. Ironic, they were the ones that said "this time it's different" during the run up to the peak of the bull market, and how "momentum investing is the best"...
12.) The institutions have loaded up. All the ducks are in a row for the rebound and the average Joe who got tooled is "never coming back" - until the next bull market (and media) catches their attention.
13.) The market rebounds. The institutions get bigger, richer and better while Joe Average goes and cries in his beer. Funny how things work.
From what I see, the "end" may be near. Now mind you, not the end of the US as we know it, but an end to that pain.
Hopefully the consumer and the government will learn to save a bit and not let people have credit who have consistently proven that they do not deserve it.
Good Luck,
Mr. Boo.
The news is terrible.
However, every big drop I have ever seen in the financial markets (and trust me, I have seen a few...) has gone like this.
1.) The economic indicators are all turning down, but the press is still bullish.
2.) The economic indicators are still falling, and the press is even more bullish than before.
3.) Things start to fall apart. The press says we "may" see some softening.
4.) People are laid off, the market is tanking and the press says, we are seeing "softening" but not anywhere near a recession.
5.) The markets are pounded. The average person on the street is seeing real impact to their wealth and the government and press recognize that a "recession" may be here. This is where it starts to get interesting.
6.) Now, the media is all jumping on the bandwagon (or badwagon) saying that the US is done, the rest of recorded history will be that of horrible famines, destruction of wealth and utter doom.
7.) We see very strange patterns. We see huge drops in the market on light volume. The small investor is getting hammered as the market makers "shake the tree" to part the individual of their shares for pennies on the dollar.
8.) The downgrades pour in from top names in banking. All the while, the major institutions are doing some buying. As the individual runs for the hills out of fear, the big players are gradually loading up.
9.) By now, the same poor schmucks who decided to get in and "play the market" have gotten shaken out, vowing "never to buy another stock again" and how Wall Street is so unfair, and how the world is collapsing.
10.) The institutions and big investors are still buying.
11.) The pain is still all over the media. Those perma bulls from before are now superbears and vow that "this time it's different" and it's never coming back. Ironic, they were the ones that said "this time it's different" during the run up to the peak of the bull market, and how "momentum investing is the best"...
12.) The institutions have loaded up. All the ducks are in a row for the rebound and the average Joe who got tooled is "never coming back" - until the next bull market (and media) catches their attention.
13.) The market rebounds. The institutions get bigger, richer and better while Joe Average goes and cries in his beer. Funny how things work.
From what I see, the "end" may be near. Now mind you, not the end of the US as we know it, but an end to that pain.
Hopefully the consumer and the government will learn to save a bit and not let people have credit who have consistently proven that they do not deserve it.
Good Luck,
Mr. Boo.
Thursday, December 18, 2008
Big Drops on Small Volume and...
You know the old saying about Wall Street being crooked.... anyhow, I am taking solace in the fact that this truism still exists.. It's alive and well, and it's giving me hope in the future of Wall Street and the financial future of this country.
Just what do I mean?
Take a look at the volatility recently. It seems to me the huge drops come in the morning, on lighter volume and the reversals are coming in huge volume. This tells me that the small "investors" are getting shaken out while the market makers are shaking the tree, while the big institutions are coming in, buying like mad and driving the prices back up.
When small investors are already skittish it does not take much to shake them out, taking their shares for pennies on the dollar. At this point, small timers are tightening up their stop loss limits, making it very easy for the market makers to make some small volume trades at ridiculously low prices to trip the stops and start a wave of selling.
The value hunters come in after lunch and start snapping up these shares on the cheap, patiently willing to hold until greener pastures surely sprout.
How am I playing this? Index funds. I am not trying to catch a falling knife. No matter how good the stock (sorry, maybe except for a bac (bank of america) bk (bank of new york) JPM (jp morgan) is. Okay, when I see the financil index XLF drop 11% in a day on light volume, I am a buyer. I will come in and snap it up for nothing more than the divident. It is currently 6% and climbing as the price continues to drop.
NEVER TAKE THIS AS PROFESSIONAL ADVICE, DO YOUR OWN RESEARCH.
I look into the index funds a a longer term investment.
Good luck.
Mr. Boo 1031
Just what do I mean?
Take a look at the volatility recently. It seems to me the huge drops come in the morning, on lighter volume and the reversals are coming in huge volume. This tells me that the small "investors" are getting shaken out while the market makers are shaking the tree, while the big institutions are coming in, buying like mad and driving the prices back up.
When small investors are already skittish it does not take much to shake them out, taking their shares for pennies on the dollar. At this point, small timers are tightening up their stop loss limits, making it very easy for the market makers to make some small volume trades at ridiculously low prices to trip the stops and start a wave of selling.
The value hunters come in after lunch and start snapping up these shares on the cheap, patiently willing to hold until greener pastures surely sprout.
How am I playing this? Index funds. I am not trying to catch a falling knife. No matter how good the stock (sorry, maybe except for a bac (bank of america) bk (bank of new york) JPM (jp morgan) is. Okay, when I see the financil index XLF drop 11% in a day on light volume, I am a buyer. I will come in and snap it up for nothing more than the divident. It is currently 6% and climbing as the price continues to drop.
NEVER TAKE THIS AS PROFESSIONAL ADVICE, DO YOUR OWN RESEARCH.
I look into the index funds a a longer term investment.
Good luck.
Mr. Boo 1031
Tuesday, December 16, 2008
Public Opinion and Market Bottoms
The stock market plays a huge role in my personal happiness, so it has been very confusing to friends and family when my toes are tapping when the Dow Industrials has toppled 6,7, 800 points in a day on horrible volume.
How can I be so happy when EVERYBODY else is so glum? How can I smile when I watch CNBC and see the cleanup from the bloodbath that day?
Simple. the market is throwing out some incredible buying opportunities. When companies like JP Morgan are at $26 per share, paying a 6% dividend - how can I not be happy? Bank of America BAC is another one. Paying a 8% yield at $14/share, this is the stuff that investment dreams are made of.
Everybody talks about buy low - sell high as a strategy. Seems simple enough, right? The problem is emotion. It is this emotion that causes people to buy Google AFTER it went from $200 to $700 in a couple of years, and keeps those same people away when that same issue drops to $300. Google at $300 is a steal compared to the same stock at $700. The problem though is group think. People feel good about "investing" when everybody else confirms their decision. They DON'T feel so great to be buying when everybody else is selling.
I don't want to try to catch a falling knife, I will get cut 10 times out of 11. But, I do want to establish a position over time as these great stocks find bottoms.
Need to run for now, but much more to follow on this subject.
Always do your diligence! Don't follow my ramblings! I am not a professional and do not want to be responsible if you lose your money!
Good luck!
Mr. Boo 1031
Monday, December 15, 2008
Sunday, December 14, 2008
XLF and XHB
As the financial markets melted down around the globe and some long heralded names of Wall Street came under attack and crumbled, we have watched some very familiar cycles unfold.
Back in Q3 of 2007 when we saw Fremont General FMTQ.PK, New Century Financial NEWC.PK, etc. start to fall apart, the market pundits assured, they said "the subprime issues are contained to a few of these niche mortgage companies" and we all took in a sigh of relief. Many promptly sold, the shorts continued their profitable barrage and we started to look ahead to a world with prime only paper being issued. Investors (using this term liberally) piled into Countrywide Financial CFC, saying that Countrywide at $20/share was the deal of a lifetime. Then it went down to $15 and many doubled down, again citing that "somebody needs to write all of these mortgages" and it continued down, and down, and we all know where that went.
It is interesting to look at the psychology behind this.
Countrywide never had to take chances. They had a literal straglehold on the A paper market. They were all set. The greed that overtook them and led them into the path of subprime destruction is the same path that many investors went down, myself to a certain degree.
Whether you are an investor, a CFO or a CEO, the lure of an asset that is discounted 50% or more is sometimes too good to pass up. That is what has happened to much of corporate America. Top executives play with their investors cash, building huge legacies, etc. not taking into account the worst case scenario.
This mentality, coupled with some of the shocking collapses that gripped the market news over the past two quarters has changed the financial landscape forever. Hopefully capitulation is finally setting in and the horrible selling has already taken place.
My point? I have a thirst for value. Mainly low PE's and a good dividend. The upside? There are many individual stocks out there that are currently very attractive given their valuations. However, how do we know which ones are safe? Financial stocks are not like retailers. We cannot see if same store sales drop, etc. The disasters in finance are ignored or hidden until they are the icebergs that sink Titanics.
My point part two. The only way that I am playing this mayhem, and this is simply my ramblings - DO NOT EVER TAKE TIPS ON FINANCE AND STOCKS FROM THE INTERNET - EVER! anyhow, my point is that I want to be in the finance stocks. BAC, JPM, C, AXP are all great plays in my opinion. However, I cannot risk another collapse.
My point part three. I am buying the XLF and XHB.
The XLF (financial sector spyder) and the XHB (tied to the homebuilders sector) are all hammered down, pay a good dividend and allow you to play in the arenas that will hopefully not go away.
This is a great way to take in the upside while greatly hedging against another wipeout. As rates get more attractive and companies and individuals start saving, spending, buying homes, etc. thse indexes should come back strongly.
Options activity suggests that this is already taking place in the XHB.
Anyhow, this is a great way to take advantage of the upside while protecting yourself against the downside.
Good luck,
Mr. Boo 1031
Back in Q3 of 2007 when we saw Fremont General FMTQ.PK, New Century Financial NEWC.PK, etc. start to fall apart, the market pundits assured, they said "the subprime issues are contained to a few of these niche mortgage companies" and we all took in a sigh of relief. Many promptly sold, the shorts continued their profitable barrage and we started to look ahead to a world with prime only paper being issued. Investors (using this term liberally) piled into Countrywide Financial CFC, saying that Countrywide at $20/share was the deal of a lifetime. Then it went down to $15 and many doubled down, again citing that "somebody needs to write all of these mortgages" and it continued down, and down, and we all know where that went.
It is interesting to look at the psychology behind this.
Countrywide never had to take chances. They had a literal straglehold on the A paper market. They were all set. The greed that overtook them and led them into the path of subprime destruction is the same path that many investors went down, myself to a certain degree.
Whether you are an investor, a CFO or a CEO, the lure of an asset that is discounted 50% or more is sometimes too good to pass up. That is what has happened to much of corporate America. Top executives play with their investors cash, building huge legacies, etc. not taking into account the worst case scenario.
This mentality, coupled with some of the shocking collapses that gripped the market news over the past two quarters has changed the financial landscape forever. Hopefully capitulation is finally setting in and the horrible selling has already taken place.
My point? I have a thirst for value. Mainly low PE's and a good dividend. The upside? There are many individual stocks out there that are currently very attractive given their valuations. However, how do we know which ones are safe? Financial stocks are not like retailers. We cannot see if same store sales drop, etc. The disasters in finance are ignored or hidden until they are the icebergs that sink Titanics.
My point part two. The only way that I am playing this mayhem, and this is simply my ramblings - DO NOT EVER TAKE TIPS ON FINANCE AND STOCKS FROM THE INTERNET - EVER! anyhow, my point is that I want to be in the finance stocks. BAC, JPM, C, AXP are all great plays in my opinion. However, I cannot risk another collapse.
My point part three. I am buying the XLF and XHB.
The XLF (financial sector spyder) and the XHB (tied to the homebuilders sector) are all hammered down, pay a good dividend and allow you to play in the arenas that will hopefully not go away.
This is a great way to take in the upside while greatly hedging against another wipeout. As rates get more attractive and companies and individuals start saving, spending, buying homes, etc. thse indexes should come back strongly.
Options activity suggests that this is already taking place in the XHB.
Anyhow, this is a great way to take advantage of the upside while protecting yourself against the downside.
Good luck,
Mr. Boo 1031
Saturday, December 13, 2008
Finance Shoppe
Stock market volatility is starting to cool a bit, this is bad news for day traders and good news for just about everybody else.
Google's - symbol Goog - has taken a real beating, falling from $740 per share to well under $300 in recent weeks is a direct indicator of something far more ominous than day traders going short or weak handed speculators selling out, they are starting to lose that most coveted of all things to a CFO, the support of the institutional investors.
All things in this blog are just my humble opinions, but here is what I see.
Financials and Home Builders are far oversold. Recent options activity in the XHB Home Builders index fund have started to come around. Volume is way up and the pricing is starting to show that the recent feeling of fear is turning back around to that of greed.
The XLF is one of my favorites, and I feel that this one is far below market value as well. With a nearly 6% yield and a price just over $12/share you can buy the likes of Bank of America BAC, Wells Fargo WFC, JP Morgan Chase JPM, American Express AXP, etc. Not a bad way to go. As the US Economy rebounds, who do you think will reap the most rewards? Obviously the names above.
Good luck to all. Buy index funds, don't catch falling knives but also don't be crippled by negative news. Do your research, use your own analysis and invest for the long term. It has been a rough year, but hopefully we are finding a bottom.
Good luck all.
Mr. Boo 1031
Google's - symbol Goog - has taken a real beating, falling from $740 per share to well under $300 in recent weeks is a direct indicator of something far more ominous than day traders going short or weak handed speculators selling out, they are starting to lose that most coveted of all things to a CFO, the support of the institutional investors.
All things in this blog are just my humble opinions, but here is what I see.
Financials and Home Builders are far oversold. Recent options activity in the XHB Home Builders index fund have started to come around. Volume is way up and the pricing is starting to show that the recent feeling of fear is turning back around to that of greed.
The XLF is one of my favorites, and I feel that this one is far below market value as well. With a nearly 6% yield and a price just over $12/share you can buy the likes of Bank of America BAC, Wells Fargo WFC, JP Morgan Chase JPM, American Express AXP, etc. Not a bad way to go. As the US Economy rebounds, who do you think will reap the most rewards? Obviously the names above.
Good luck to all. Buy index funds, don't catch falling knives but also don't be crippled by negative news. Do your research, use your own analysis and invest for the long term. It has been a rough year, but hopefully we are finding a bottom.
Good luck all.
Mr. Boo 1031
Subscribe to:
Posts (Atom)