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  • 19 OCT 2008

    OMG, The Market

    A post by Sean Fenlon as Uncategorized

    Post By
    Sean Fenlon

    I agree with Warren (Warren Buffet, not Warren Sapp). ;-)

    Stock Markets? Financials? The value of the DOLLAR?…

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    The financial world is a mess, both in the United States and abroad.

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    Problems have been leaking into the general economy, and the leaks are now turning into gushers.

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    In the near term, we’ll hear about more job losses and businesses will face new challenges.  Expect a more than just a few more scary headlines.

    So… BUY AMERICAN STOCKS! :-)

    Even before Buffet’s column in the New York Times, I had bought GOOG near its 52-week bottom.

    Even though I’m reasonably dialed into everything that is going on in the world, I’m still very bullish on USA and on Google.

    Buy with your business AND your personal accounts — transfer away from all your bonds.   You are witnessing unprecedented fear and unprecedented opportunity.

    Who knows the final-bottom-number, but few argue that there will indeed be a bottom.

    Now is the time.

    SPF

    You just read:

    OMG, The Market by Sean Fenlon

1

    Ken 1206 days ago

    Not so fast…

    Common knowledge holds that the best American response to calamity is to spend. Examples of this home spun approach include Bush’s post-9/11 advice to America to go forth and shop. It this case, it didn’t help. Likewise, it’s not good financial management to begin an equity shopping spree.

    NBR reported last night that many money market fund managers were liquidating commerical paper and replacing it with U.S. Treasury debt. These are to experts and they are heading to safe public instruments and abandoning private notes. It’s worth questioning why financial cheerleaders urge individual investors to stand firm while they hedge with safer allocations.

    Many prominent economists believe that the short-term impact of of the derivitive market excesses with not be fully manifest for years. The New York Times editorial board a few days ago cautioned that hedge funds had extracted huge amounts of cash from acquired businesses only to replace it with more leverage. They concluded that we could see a wave of corporate bankruptcies once that debt matures.

    The Detroit melt-down is far from complete and is the harbinger of another long-term factor that is critically important – loss of high paying blue collar jobs that cannot be easily replaced by the service industry. The wages will be sorely missed and consumption will be depressed. Blue collar pensioners are also reducing consumption as benefits are curtailed and healthcare is reduced or eliminated. GM will no longer provide heath insurance to managers over age 65, transferring the burden to MediCare.

    Re-allocating one’s portfolio is an obligation, not an option in hard times, and the prevailing wisdom of long-run, ever-raising stock indices may be baseless. The best strategy is to preserve capital and only assume greater risk when better times arrive. That will take some unkown period of time, and we know that predictions, especially about the future, are problematic.

    In the short run, individuals should not allow any further erosion in their retirement accounts and should be content with 3-4% returns from FDIC insured instruments until the economy is stable. That could take years and standing on the sidelines while stocks and equity mutual funds decline is not sound strategy.

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