Another mudslide down?

I didn't realize that it's been about 2 months since my last post. My extreme apologies to anticipating readers, if I have any. I would love to hear your comments or suggestions if anyone's out there. :)

So, the markets are just painful to look at. Up and down, but down all around. I'm thinking that this next phase can be likened to a mudslide. The mud comes slow and engulfs and destroys, but it does it slowly. No more of the crazy volatility +-10%, at least for now while the news has been quiet. Just some ups and downs, with a downward trend for who knows how low? 

Things just can't get better right now. People don't just change their behaviors in a split second. Holiday sales were weak, with stronger post-Christmas shopping. Nevertheless, we won't make this economy go up unless everyone starts doing their part and buying more. Of course, manage your debt while consuming, but we need to eat, don't we?

Oh Woe, Things May Keep Going Down

I sold all my positions by yesterday morning except for everything in my retirement funds. Why, after I talked about holding for the long term? To be honest, my nerves couldn't handle seeing the markets in such wide swings, potentially depleting my most liquid assets that I'll need to pay rent, insurance, and bills. Also, the news from the past few days has been all negative. Yes, lower interest rates may help ease the economy's pain, but do you really think all the suffering of individuals and companies are over? Maybe it's still only the beginning. Regular people are reducing their spending...I plan on giving handmade presents this Christmas. Who knows when the blood will stop spilling? I think that I'll take this time in the next few days to envision my ideal portfolio and delve into the specific purchases I would want to make in this or an even worse environment down by 20-50%. 

By the way, I don't count retirement investments such as 401(k), 401(b), IRA, or Roth funds with long horizons as part of my liquid funds. In fact, in my mind, they're untouchable until age 59 1/2. So, I could lose greatly on these assets, take great risks, and be ok. Therefore, I still definitely have stocks there.

I think I'll write an entry on taxes and fees associated with stock selling and buying by the end of this week. Would you find this useful?

Negativity In The Air

Headlines containing words like bloodbath, meltdown, and chaos rule the headlines this morning as overseas markets performed very poorly last night due to fears of worldwide recession. Things are looking bad, but I think they may only get worse as utter despair hasn't yet seemed to hit Wall Street.

With all the bad news, what will happen today?

With all the bad news yesterday with Wachovia's and other profit losses as well as higher initial jobless claims rising to 478,000 last week, I wonder how volatile the markets will be? I just bought SanDisk (SNDK) at 9.60 because it fell over 30% in one day on news that Samsung dropped its bid to acquire it. When there's negative news, the stock markets usually overreact, taking time to correct itself.

Comparing Sports Car Racing & Financial Vehicles

Yesterday, while attending the Monterey Sports Car Championships (I plead very limited knowledge of cars in general, all I know is that I like them small and fast), the last race of the American Le Mans Series, I got to thinking, these drivers on the tracking are speeding at over 200 mph, weaving between other cars, a hunk of fast, powerful metal on cement. The smell of burning fuel and tire fills my lungs. Why am I not behind the wheel? Well, in addition to that, I was thinking, when we see a dangerous a curve ahead, we often slow down. But how do we slow down without being beat by other investors around us and without crashing and burning or denting our nice rims? 

First, have a great engine and vehicle, right? Our financial vehicles should be great, without any huge flaws. Riding a good stock is important, especially on the ride through that dangerous curve.

Second, getting through the curve more quickly than others will require some thought. I know, I'm leaving you hanging. Until tomorrow...

Warren Buffett Writes A Great Op-Ed

Warren Buffett, someone who I greatly admire, and even have a YouTube video link to (on the right hand bottom), just wrote a great Opinion article in the New York Times yesterday, found in today's paper. In majority, I do agree with his views, although I have some doubts as to buying wholly American. He has often said that he buys into companies that he can understand, not thing like technology stocks.

There were some great classic quotes from Buffett that I'm definitely trying to internalize and hope the U.S. will as well:

-A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful

-In short, bad news is an investor’s best friend. It lets you buy a slice of America’s future at a marked-down price.

-Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.
and the simplest key takeaway:-Today my money and my mouth both say equities.

To say I have stars in my eyes when he speaks is an understatement. There's a reason why he's worth billions and beats the markets consistently. He doesn't get swayed by the fear and negative consumer sentiment. Another principle of economics, the herd mentality, can be a bad thing. Until we see doom and gloom as if hell is on earth, I'll be continuing my buying strategy.

Dollar-Cost-Averaging To Ride The Bottom

I have to admit, market movements actually do affect my mood and even physical sense of well-being. It always gives me an adrenaline rush to look at those little graphs every few hours. Last night, my dad told me: there's only one person that is able to buy a stock at the lowest price, and only one who can sell it at the highest price. The rest of us have to be alright with being in-between...coming from a man who lost almost everything he put in after the dot com bubble burst.

Hindsight is 20/20. GE touched 18.31 today. I occasionally (fine, I exaggerate, I mean, really often) kick myself, thinking, why oh why didn't I put in order for 18.50? I knew it. I so knew it.

So, what can we do in foresight? There are so many different kinds of trading strategies out there. I just think about dollar-cost-averaging, since this is the best way to profit over the long term. Investopedia says so. Dollar cost averaging is the idea of buying a set $ amount of stock over the course of a long period of time, a period of months and years. For instance, you could buy $100 worth of 1 stock every month. Some days you're able to buy a few shares, some times, when the prices are lower, you'll buy more shares. Over time, the gains will be more than the losses because of the upward trend our markets have.

If you haven't already, why not start now? Doesn't seem to be a bad time since it's been a year since the market peaked. That way, you can ride your way down to the bottom.

Do you agree? If not, I would love to hear other thoughts.

Consumer Confidence In The Longer Run

Let's go back to the basics. Price is determined where supply meets demand. When demand rapidly shrinks (more sellers than buyers), prices rapidly shrink? Isn't that funny? Such is the way of stock prices. Short-term prices are determined by the big guys in the banks who play in the markets all day. Then, there are us poor folk who wouldn't be able to keep up because we work another job that doesn't require us to look at multiple Bloomberg-filled screens all day. 

A good temperature check on the general direction of the markets would be the various consumer confidence indexes out there, especially the CCI (Consumer Confidence Index) and Michigan's Consumer Sentiment Index. When there are strong results or opinions showing up in these indexes, we definitely know where the prices for stocks will be headed for the longer term. This is just a general rule of course. Certain companies or industries aren't necessarily ruled by this.  If consumers are spending too much money on gas and have very little available income left, they won't be spending anywhere else, that includes most goods and services sold.

You could also ask the person next to you. Do you see them spending more or saving more in FDIC-insured holdings? How long do you think it will take for them to change their opinion of the economy and begin to change their spending habits? Quickly? Of course not. That's what Bernanke warned today. Hopefully, his words will set consumer expectations at the right level...not too high, not too low. It'll be a slow recovery. Change never is.

p.s. Tomorrow we'll most likely see a lull in the markets, as in less volatile levels, if the prices don't drop. In this case, you could buy sometime during the day. If the prices do dramtically go down, I would say, a good time to buy, especially after 2pm, better if you time it for 3:30-3:50. In a down day, prices tend to dip to their lowest. If you're busy at that time, well, why not put in an order at a limit price that you won't kick yourself over paying? I'm pretty happy with my GE purchase. Today's low was 19.01. But at a dividend of $0.31 per quarter, I'm still yielding 6.36%, definitely  higher than the dinky 2-3% return I get from my CDs and money markets.

As Predicted, Stock Prices Are Declining Again

Last night, I predicted that people will try to bring pressure back to the bottom of Friday. I believe that's what's happening right now. I just bought General Electric  (GE) at 19.50. It's slightly pricey by today's standards, but hey, I'm in this market for the long run. When the economy turns sweet again, good stocks with good management bounce back. I'm sure the stock prices will fall even more, but it's all about dollar-cost-averaging baby. No one can time the markets that precisely.

Later tonight, some thoughts on the importance of consumer sentiment on the markets. Stay tuned...

There's Going To Be Some Market Testing

So the Markets rallied Monday, October 13. Tuesday's response was tepid with the Nasdaq falling 3.54%, and the Dow and S&P 500 declining less than 1%. That's not too bad given the wide swings I think we're used to by now. People are waiting to see what's going to happen.

Feeling bad that you didn't time the markets correctly by not buying anything on Friday the 10th? Or were you in my situation, where my brokerage had problems transferring funds on time?

Personally, I think that there will be some testing where prices will fall again to near Oct 10th levels, especially with still very negative consumer sentiments. In addition to that, the worst is not yet over. How could the markets have bottomed when we still expect to see more foreclosed homes, higher unemployment rates, and credit swaps unwind completely?

What about the financial industry and stocks liks GS, MS and BAC? We saw huge gains in the past few days after Sunday's G7 talks. I thought they were undervalued last Friday because of extreme fear. For instance, GS dipped down to $74.00. Now, they seem to be at more sane levels. For bargain hunters out there, financial services aren't something to go into for now.

We should be looking at the top-quality stock bargains out there. I like BA - although I have a feeling they will continue to fall little by little over the month or so since the negotiators are making little headway with the machinist's union on strike right now. Another favorite is GE. They're huge, solid, and still have room to grow internationally.

Next, more to come on my reactions and forecasts to the next few days of the market's roller coaster ride. Can't wait to see what happens.