Paul, Paul….would you please look back at your many articles over the past year and do a tally of the number of BEARS you have talked to, written about, or quoted? I don’t understand how you can possibly think you have been balanced.
I beg to differ with Mr. Mergler. It is NOT “insane to dump a stock if you still think the fundamentals are sound.” It is the essence of prudence to dump stocks period, if you think the economy’s fundamentals have been unsound for at least two to five years.
The funds you free up from even the supposed “sound” stocks is available to buy up all sorts of horribly beaten up stocks. Does this market timing strategy usually work? No! But if you had been talking to the SMART bears ofer the last two+ years besides allmost exclusively the “smart?” bulls, you might have seen this train wreck coming. And a few of your faithful readers would have been well served. It isn’t too late for you to re-balance the scales, but you don’t seem inclined.
There will be many sectors that hold up relatively well (all you have to do is better than mortgages, housing, finance, and autos to outperform) and companies within their sectors that outperform their sectors (Intel and HP in the electronics space, as they rack up profits and gain market share). It is tough going for everyone because there isn’t much growth out there.
As far as the stock performance of the companies, that is anyone’s guess. As other posters have already noted, there are so many traders, shorts, funds, etc. out there with lots of borrowed, cheap money that they can disconnect company performance from stock performance for long periods of time.
I think Berkshire Hathaway is a good model: growing, profitable, and tons of cash and cash flow. Find more stocks like it.
It is extremely hard to tell at this point. The “giver”nment’s interference in the marketplace had distorted all of the fundamentals we used to look at. Who will do well? Those that acquiesce to the “giver”nment’s control. We have turned a corner in American history, one that we will grow to rue in the future.
NONE.
here is Bernanke’s speech translated by a Wall Street Banker. This is explain why there will be no safe company or economy to put your money into.
WASHINGTON (Reuters) – The turmoil in credit markets poses a “significant threat” to an already slowing U.S. economy, Federal Reserve Chairman Ben Bernanke said on Wednesday, suggesting an openness to further interest-rate cuts.
In remarks prepared for delivery to the Economic Club of New York, Bernanke said it will take some time to restore normal flows of credit and he pledged the U.S. central bank would continue to act aggressively to fight the crisis.
“By restricting flows of credit to households, businesses, and state and local governments, the turmoil in financial markets and the funding pressures on financial firms pose a significant threat to economic growth,” Bernanke said.
“We will continue to use all the tools at our disposal to improve market functioning and liquidity, to reduce pressures in key credit and funding markets and to complement the steps the (U.S.) Treasury and foreign governments will be taking to strengthen the financial system,” he said.
The turmoil in credit markets poses a “significant threat” to an already slowing U.S. economy
– translation the US economy is bankrupt and poses a threat to our way of life.
suggesting an openness to further interest-rate cuts.
– translation we can not even give money away no one wants our useless money
he pledged the U.S. central bank would continue to act aggressively to fight the crisis.
– translation it’s hit the fan and we are all going down and there is nothing we can do to stop it.
“By restricting flows of credit to households, businesses, and state and local governments, the turmoil in financial markets and the funding pressures on financial firms pose a significant threat to economic growth,” Bernanke said.
– translation I say again we are bankrupt and our money is worthless.
“We will continue to use all the tools at our disposal to improve market functioning and liquidity, to reduce pressures in key credit and funding markets and to complement the steps the (U.S.) Treasury and foreign governments will be taking to strengthen the financial system,” he said.
– translation I am moving all my American money into Euros and Chinese yuan by the end of the day and I would suggest you do the same.
For sure businesses who have a product in a market that is considered a necessity, such as healthcare, will obviously do well. The problem for businesses going forward the current market rules have changed over the past several years. I submit the current market is more of a Casino then true investing. The shorts, day traders, bundling of assets, etc, are making it very difficult for a “true investor” to have any sense of control even over the long-term. This market is not your father’s or grandfather’s and thus applying rules such as “be in it for the long-term” may not apply and from what we have seen in the last couple of days (months) one might conclude to be a true statement. Therefore, translating into a problem for “real product” companies to get a fair shake in the “Gambling Wall Street”. Companies are going to struggle getting their positive message out as the gamblers really do not care, quick buck, line my pockets, who cares about the long-term mentality. Lets get back to real investing and I believe the economy will react positively and predictably. Translating into an environment where more companies benefiting on the positive side as opposed to current conditions of negative. Lets do it the “Old Fashion Way” earn it?
The strongest companies during the downturn will be those with quality that is in line with their price. People aren’t going to pay an extra $200.00 for a name brand, but they will pay extra for a new feature or a brand with a good warranty.
Overall the successful will be places like Target, Walmart, and Cheesecake Factory. Most will take a strong hit during the holiday season but not all. PS3 and Xbox probably won’t sell as well as say the Wii. They’re all game systems and the Wii is much less expensive. Parents won’t see the added value in the better technology because many probably don’t have a television that shows the difference.
Overall the message will be fair quality for a fair price, and all who adhere to that will thrive once the credit situation improves.
There will always be companies that outperform, this is nothing new.
The current economy is just plain bad. Prices are up (for everything except gas), paychecks are down (the unemployment and underemployment rates both are on the rise), and there is still a lot of uncertainty in the markets. Retail sales look bleak going into the holiday season. If 2/3 of our GDP is based on people buying stuff and half of all stuff is bought in November and December, that means that 1/3 of our GDP will be decided at a time when people are tapped out, not borrowing, and worried about their jobs. Throw in the election (which is in 20 days) and there are too many unknowns for the market to do anything but drop.
Companies like Wells Fargo, Bank of America, etc… will continue to prosper even in a slow economy. So will the businesses that produce a quality product that is necessary and resonably priced like Intel, Honda, etc… Why? Here’s why I think this is true.
1. Because they practice prudent business practices i.e. require a fair contract between buyer and seller where all the terms are disclosed. If you know what you’re getting, don’t have to sift through complicated rules and pay with money you really have everyone gets what they want, right?
2. Because they don’t play strike it rich games. If this worked, we’d all go join a multi-level marketing campaign.
3. They live in the real world. We all can play at the financial craps table and hit a few times, but the guy who takes full odds evey time the dice are rolled doesn’t last long. Expecting real world results while the rest of the world is bragging about their fantasy earnings is the Tortoise and the Hare of the financial world. Slow and steady wins the race.
Summary Point: Business is always the same. You sell a product for a reasonable return and you make money. Try to make it too quickly, or reduce or even eliminate the quality of the product, eventually you loose.
Stop thinking this is the “New” economy. Only the games people play are new. Business is always the same at it’s core … period!