Now I know we would all love to look up in the sky and see Superman flying in to save the day but what we need is a dose of reality to face these markets. And instead of relying on one person which is what Wall Street usually hopes for, the President - elect may be taking the best approach of them all. With most people completely discounting the words of the current president, George Bush, everyone is turning to the guy who isn't the current president to make presidential decisions before he hits the office. Obama is going against the grain and this must be his motto at this point. The prevailing model has often been 1 man running- the- show and that one man gets the credit like in the days of Alan Greenspan or more recently as we've relied on Ben Bernanke and Hank Paulson. Well, this time around President - elect Obama appears to be naming a Super Team to handle this Super Crisis! Obama is naming people on both sides of the economic aisle in an effort to determine a way to bring us out of this mess.
Now my orginal story is trapped on another computer but here is the direction I was going while I was putting that together, what do we do from here. Here are snippets of what I am thinking and I will include my pre-written thoughts a few days from now:
Access Current Economic Environment: I have to admit that I am early or wrong in thinking that the recent economic declines would begin to push demand for regular goods high (i.e., inflation) while the government prints money uncontrollably. Well we have seen that the economic indicators are far worse and that is leading to a rapid decline in every good across the board which is more like deflationary pressures on our economy.
What Solves The Situation: One thing the market is looking for is clarity about what the future will look like and they haven't been able to get that from the Lame Duck President George Bush. I think Obama's team has taken a delicate but decisive approach and released 3 straight days of news that is addressed directly at the economy...something I would expect from our current President. And notice what the results have been, a strong response from the markets even with more bad news coming out. That is a very solid sign when bad news is coming out but the markets are "shrugging them off".
What am I going to do: I am taking an aggresive approach and dividing my world into 2 segments. My retirment world and my investing world is what I call them and here is the part that you are most concerned with. In my retirement world, I have sat on the sidelines with no cash investment in stocks for the last few months because of the uncertainty out there. I believe we may have taken the right approach as the markets have gone down further and tests lows not seen since roughly 2001-02. But the market has been bounced off of these levels and in my opionion I may shift back into the markets if and when we near those levels again.
In my investing world I am searching for the worst of the worst and trying to find opportunities for long term and short term investments. For instance I like the stocks that will benefit from the roughly 1 trillion dollars that we are currently throwing at the markets. So I am weeding through the financial sector, beaten down stocks, and then I am going to the other side of the spectrum and looking for those least affected by all of this.
Financial:
How about looking at Citigroup (C), at this point they appeared to be dying like a patient with a bad heart but they have been give recesitation by the government. This means dying is not a option and I would buy on any dips in this stock...of course I have a thing for 52 week lows, which means below $4!
Also, how about Discover Financial (DFS), who is stuck in the middle of all this credit crunch. They are exposed to credit consumers as they hold consumer debt, but have a transaction processing network and stand to gain from the legal battles with Visa and Mastercard. With recent run-un, I would again wait until this drops below it 52 week low and begin forming a base at around $6.50.
Limited exposure to credit consumers: There are transaction processors that are indirectly affected by the credit crunch but this group is not directly affected. The likes of Visa, Mastercard, and others may be interesting plays. Again I would take an agressive approach and buy at 52 week lows which is $43 and $113 respectively.
Just simply beaten down:
Sirius - this is trading @ 14c, can it go any lower
Jeffries - an investment bank still standing
Big Lots - discount retailer, and logic says consumers may start turning to this sector
Apple/Research in Motion - they make stuff ppl want
Radisys - 2 straight quarter of solid results and no huge move in the stock...only time they will figure it out
Give consideration at 52 week lows!
The Trend is your friend:
SSG - This ETF shorts the semiconductor sector. A great hedge as we expose ourselves to the sectors like technology, but if the market continues to go down we have a friend. Look at $140
S&P Financials - Is this too beaten down, maybe not because the TARP money will not be used to bail buy bad assets which means they will need to be written off. So short this sector!
Retailers - Short retailers, simply no one has any money to buy a damn thing! Even luxury retailers Saks, Coach are claiming they have to give discounts to lure "affluent" customers...I guess the trickle down effect doesn't work in this market
STAY TUNED! More to come
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