Are We Going Up?
…signs of life in the market
Nobody can call a bottom to the market with certainty, but smart analysts can sometimes recognize signs of life. I don’t present myself as “smart,” and I can’t prove there’s permanent bullish life in the market as of this moment; but many people—much smarter than myself—are acknowledging new reasons for hope. Maybe the recent multi-day rally is just a “bear market bounce,” but if it is, this bounce seems to have legs.
A few bright spots: the rise in the market is not just limited to one sector, it’s broad-based. Financials have gained relative stability. Inventories have swung to the downside which is a great setup for an upward trend. Further positives: operating margins of companies are better because they’ve been forced to be better operators. Also, housing starts for February were up 22.2%.
Admittedly, volumes in the market have recently been thin revealing that conviction among buyers is not energetic. However, negative news flashes haven’t had great effect on the market lately because negativity has pretty much been priced into stocks; conversely, even slightly positive news has given good uplift for buyers.
It’s totally possible that the true bottom is yet to be reached in the U.S. market, but there’s a sense of change within the winds of change, and that’s enough to motivate wise traders to sit on the edge of their seats looking intensely for the right opportunity to buy. Likely, it won’t just be an issue of buying on the right week or the right day, but at the right moment. Timing is critical. Here’s an example of how crucial timing is:
If you invested $1 in 1966, and reviewed the results of your investment on January 15, 2008, there are several possible outcomes, depending on your timing and where you put the money…
Scenario 1: if you put $1 into a savings account at 6.7%, it would be worth $16.58.
Scenario 2: if you put $1 into stocks without the 5 best days, it would be worth $ .11.
Scenario 3: if you put $1 into stocks without the 5 worst days, it would be worth $2,520.
So, when it comes to investing and trading, timing is a big deal!
Thursday, March 12, 2009
Market Thaw?
...Cautious Optimism
In the midst of the gloom and doom atmosphere, positive financial indicators are sneaking up onto the stage from behind the curtain. We’ve all been bruised by the economy, and so nobody really wants to get too optimistic. However, wise traders will keep their eyes and ears riveted on the shifting climate. Here’s what we’re seeing:
> Americans are driving again with gasoline demand up 3% from their lows.
> California and Florida house sales are soaring.
> In China, car sales surged 25% in February, which is the first gain in 4 months.
> The banking sector, of course, has been bludgeoned beyond recognition, vilified, spat upon, and forsaken. BUT…even in that deep, dark pit where there’s still downward pressure in the system, better earnings may be on the way. The banking system (pre-provision) earns $220 billion a year. So they could be very capable of digging themselves out from under the soil that’s buried them alive, and emerge back into profitability, even doing so without TARP money…dollars that many banks have resisted. In addition…
Deposits are rising, and that’s where loans come from. Also, there’s a positive slope in the yield curve which means that it’s cheaper to borrow in the money market in order to make loans at a higher rate. Net profits are rising, net interest rate ratios are rising. So there’s a growing cash-to-cash improvement in the banking world.
Meanwhile, stocks are screaming, “buy!” because so many great companies with super fundamentals have been beaten to a pulp, thus, they are extremely cheap.
Nobody can predict a market bottom with certainty. However, the market has always worked on cycles. And the deeper the pit that any given market has fallen into, the steeper the slope there’ll likely be to the upside when life in the market begins emerging with confidence and hope.
Get your money ready, your knuckles cracked, your pencil sharpened, and, for goodness sake, don’t stay asleep under the warm blanket of doomsday pessimism!
In the midst of the gloom and doom atmosphere, positive financial indicators are sneaking up onto the stage from behind the curtain. We’ve all been bruised by the economy, and so nobody really wants to get too optimistic. However, wise traders will keep their eyes and ears riveted on the shifting climate. Here’s what we’re seeing:
> Americans are driving again with gasoline demand up 3% from their lows.
> California and Florida house sales are soaring.
> In China, car sales surged 25% in February, which is the first gain in 4 months.
> The banking sector, of course, has been bludgeoned beyond recognition, vilified, spat upon, and forsaken. BUT…even in that deep, dark pit where there’s still downward pressure in the system, better earnings may be on the way. The banking system (pre-provision) earns $220 billion a year. So they could be very capable of digging themselves out from under the soil that’s buried them alive, and emerge back into profitability, even doing so without TARP money…dollars that many banks have resisted. In addition…
Deposits are rising, and that’s where loans come from. Also, there’s a positive slope in the yield curve which means that it’s cheaper to borrow in the money market in order to make loans at a higher rate. Net profits are rising, net interest rate ratios are rising. So there’s a growing cash-to-cash improvement in the banking world.
Meanwhile, stocks are screaming, “buy!” because so many great companies with super fundamentals have been beaten to a pulp, thus, they are extremely cheap.
Nobody can predict a market bottom with certainty. However, the market has always worked on cycles. And the deeper the pit that any given market has fallen into, the steeper the slope there’ll likely be to the upside when life in the market begins emerging with confidence and hope.
Get your money ready, your knuckles cracked, your pencil sharpened, and, for goodness sake, don’t stay asleep under the warm blanket of doomsday pessimism!
Subscribe to:
Posts (Atom)