Wednesday, October 22, 2008

Lows Lows and More Lows

Are we headed for a depression? I was hanging my hat on earnings and many have been dismal. I actually liked most of what I heard from Seagate STX, yet the stock dropped like a rock after the report. I cannot believe that oil has fallen to these levels. For those of you that have been following the site for a while, you know I talked about being amazed that the market was going up when oil was steadily climbing over $100. I am just as perplexed at the moves on the downside with oil. So the question is---if the positive move in stocks in the face of rising oil was a sign that oil was overdone to the upside---are falling stocks a sign that oil is going to recover? This is kinda the which came first the chicken or the egg question. Commodities are getting slammed and everyone is claiming that it is due to the global slowdown. The credit markets are SLOWLY healing. When do the falling commodities prices jump start the economy? Are all of the consumers bankrupt? Is everyone upside down in their house? I am trying to play the moderation card here, but you simply can't fight the market on days like today. I can't wait for FLR to report their earnings. I just don't see them being that bad.

I think we are headed to 7900 again on the Dow and if we break below 7800 we are in a world of hurt. We could see 6500 if we break below 7800. I don't think we will, but stranger things have happened over the past couple of months. I personally saw some good things in the STX report and the T report. I thought it was silly that the street punished T for their earnings. If you read the fine print--it seemed that their larger than expected expenses came from the i-phone. To me that ultimately means that they are building a large---potentially loyal base of new customers---hardly something to punish a company over. But these days it fashionable to sell first and ask questions later.

Many of you have emailed and asked--or laughed at how hard the Chinese market is getting hit. I agree that they have been hit hard, but the question is have they done a better job of letting the free markets work than we have? Has the more socialist of the countries acted with more respect to free markets than the leaders of the free world? If they have, then they are poised to recover faster one would have to think.

So where do you go with your money now? Gold? Stocks? The Mattress?
I am selectively looking at stocks just as I have said in my last few posts. I will watch the overall market and have my list ready. I will add about 25% more exposure to equities if we test 7900 and bounce. If we break 7800----I am going all cash.


Doug said...

It seems that the overseas market are just now catching up with the turmoil in the U.S. What about shorting internationals. Overseas are looking rough overnight.