I feel it is important to watch this uncut interview between John Stewart and Jim Cramer... It kinda puts things in perspective and let's us know just how off path we have gone... So many people have been devastated from this financial collapse...
It has been a rough couple of months for the stock market the Dow fell from its high of just over 14000 down to under 8000 at one point! What a vicious drop that was... by far the worst I have traded through in my career. So what should you do now?
Well things certainly aren't looking that good with the overall economy, but the real question is how long can this downturn last? 6 months? A year? 2 years? Either way you need to consider your time horizons for your investments. Being that I tend to hold on to a position for over a year I am not worried. In fact, now is one of the best entry points I have ever seen. The valuations of stocks have come down so much that even with companies making less money then in previous years there are plenty of companies out there worth investing in. Sure it could get worse, but I think we have already put in the bottom on this downturn.
Of course if you follow the blog I kinda start to sound like a broken record, but it is important to understand. First of all don't buy all at once, as you can tell from the recent volatility in the stock market putting all your money in at once just doesn't make any sense. If you scale into a position and have a long time horizon you will do fine.
My personal recommendations at this point are ESLR, GOOG, RY, SU, ORA and YUM...
With the amazing price action in the markets today you might just be suffering from motion sickness. The Dow traded today in a 600 point range... that's right it was down over 300 points at one time during the day, but came back and closed up 298 points in a flurry of short covering and long term bulls.
Needless to say this is a very good sign... With the fed's decision to cut interest rates by 75 basis points yesterday, news of bail outs for loan companies today and a stimulus package from the US government, we are forming a bottom in the markets.
This January was shaping up to be the worst on record before today... As an investor what you need to ask yourself is how bad was it out there for my company? For most stocks in the mortgage and US banks markets, it couldn't get much worse, but there is plenty of companies out there that aren't really affected by a slowdown. They were just taken down with the rest of the market, and are at bargain prices compared to just a month ago.
Since this blog is all about long-term investments these might be fairly redundant but, Royal Bank Of Canada, Zoltek, Google, Evergreen Solar, Boeing, CECO, Vasco Data Securities and Yum brands are all looking tempting at their levels. If you are a first time investor, or have been waiting on the sidelines with cash waiting to get in you had better hurry. The market is oversold, and it is only a matter of time before the fundmentals and long-term outlooks begin to matter again...
Tomorrow looks like it is going to be a blood bath for the bulls... The Dow futures are down as much as 520 points as global markets around the world are being hammered. If you are a long-term investors these are the hardest times to take. It is tough to see your hard fought gains go down the drain as the bears take over and short everything in site.
The fact of the matter though, is that stocks have outperformed every asset class over a 20-year period. If you are in it for a the long haul you will be alright, in fact you should be doing some buying of quality companies on sale as the dust settles and people realize that the global economies aren't just going to collapse.
Technology companies will continue to make money, alternative energy will still be a huge growth area, whether or not a bank or insurance company goes under. People will still consume, and companies will still make money...
Most of this decline is simply due to the fact that the banks lent out money to people who couldn't afford to pay after they jacked up rates. I mean isn't it the banks job to make sure it's clients can payback loans even if interest rates jumped? Either way, there is one simple solution and that is an emergency fed meeting, and a large rate cut. The bulls have been on the sidelines simply waiting for the next fed meeting. If this doesn't happen tomorrow it will get ugly... very ugly.
Well, Mr. Ben Bernanke, now is your time to shine...
