Today’s Stocks & Topics: 401K, (EWY) iShares: MSCI S Korea, (SRS) ProShares UltraShort Real Estate, The Stock Market, New Investor.
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Today’s Stocks & Topics: (FNF) Fidelity National Financial, Limit Orders, The Stock Market, (SBR) Sabine Royalty Trust, S&P 500.
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There was some good news in the retail numbers over black Friday weekend which showed sales up 7% over last year. That is total sales which means more money was spent this year than last probably because there was so much discounting going on. Many experts feel it will not last throughout the holiday season and expect less money being spent overall, but those same experts expected a bad Thanksgiving weekend retail sales report.
We may indeed have poor numbers in retail sales this Christmas but with gasoline prices half of what they were a few months ago maybe consumers will rebound. Also, with mortgage rates falling refinancing will likely pick up and monthly mortgage payments will shrink putting more money back into the consumer’s pocket. That would be a longer term impact but it is positive.
On the negative side manufacturing activity declined in November at a very rapid pace. The ISM index fell to 36.2% from 38.9% in October. Any reading under 50% indicates shrinkage in manufacturing and over 50% an expansion.
The economy is still sinking and as I have said repeatedly, watch housing. This morning one of the builders got an upgrade from Citigroup as prices of homes have fallen so much that buyers are being attracted. That does not mean a turnaround has started, but it is one small step in a series of small steps in the right direction.
Good Trading
Steve Peasley
The biggest item in my mind on the economic front this week was not the billions of dollars allocated to Citicorp or the new asset purchase program with billions more of our money, but rather the existing and new home sales report for October. The existing home sales report on a nationwide basis showed a slow down in sales and prices but also a reduction in inventory. In California and Florida sales rose as prices have come down to a level that is starting to attract buyers. Many of those sales are for homes that are in foreclosure. The new home sales report was also weak with sales and prices falling. However, inventory fell as well from a high of 11.4 months to 10.4 months. So for both new and used homes inventory is finally beginning to fall. That needs to continue for a bottom in the stock market to be formed. Also, interest rates are poised to fall having stayed in the 6% range for a 30 year fixed for some time. I think rates will fall to 5.5% or lower in the not too distant future and that will spark a rash of refinancing and new home buying.
I think lower interest rates are a sure thing simply because the government announced another program to buy troubled mortgages and other loans directly from the banks. This should push the banks to increase credit availability and that should lower rates. With the Fed Fund rate at 1.0% and likely to be lowered, downward pressure on mortgage rates will continue.
On Wednesday, the day before turkey day, there was a rash of economic stats released and all of it bad. The market’s reaction was very mild, telling us that bad news is built in to stock prices. It’s not what is expected that is the problem it is the unexpected and we have had a number of unexpected bad news in recent months.
The market is struggling to hold the lows. That number appears to be around 8,000 on the DOW. It dropped to a close of 7,550 for one day and then bounced back above 8,000 this week. Many experts are calling a bottom. That may be true but I think it is too soon to make that call at this time. At some point we are going to have a huge bear market rally and it is going to be difficult to call that point. Bargains are everywhere and buying stocks at this point appears to make a lot of sense, but every rally recently has been followed by an immediate sell off. This action is usually associated with a bottom for the market. Bottoms are not pretty; in fact they are messy and can be protracted. We seem to be in that category at this time.
Should you be buying? Yes, but very slowly and carefully. It doesn’t hurt to have a lot of cash out of the market and a short or two, but be very quick to pull out of the shorts. I believe the market is putting in a bottom, but is it ‘the’ bottom? No one really knows. That is why housing is the key. If inventory continues to shrink, home prices will stabilize. If that happens banks will decrease their worry about a shrinking balance sheet. That will put more downward pressure on mortgage interest rates and refinancing will pick up resulting in lower monthly payments for consumers. Of course that puts money in their pocket. It might take a little time but when these things happen consumers will gain some confidence. Housing is the key and it starts with shrinking inventory and lower mortgage payments, both which seem to be happening. That is good for the stock market.
Today’s Stocks & Topics: 401-K, IRA, College Savings, Interview with author Jeffrey Krames - “INSIDE DRUCKER’S BRAIN”, Real Estate, Valuing a Stock.
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Today’s Stocks & Topics: The Most Often Asked Questions On Investtalk.
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Today’s Stocks & Topics: Investing for kids, Paul Volker, Dogs of the DOW, (MSFT) Microsoft Corporation, The Stock Market, Housing, The Economy, Fannie Mae.
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We had a number of economic reports out this morning and most of it poor. Everyone expected it to be poor so the market’s reaction was not that striking. In fact, after the first half hour the NASDAQ moved to positive territory.
When bad news no longer affects the market, this is normally a sign that the bottom of the market is near. Of course if bad news is expected the market has already priced in that bad news. It’s the unexpected that moves markets dramatically and we have had many unexpected market moving events in recent months.
There is no predicting the market. You can be cautious, or you can be daring, it all depends on your personal level of pain. There has certainly been a lot of that so far this year.
The market will recover, it always has. For that recovery to begin I think we need to watch housing. When inventory shrinks and sales increase the bottom will be near. To have that happen interest rates need to fall.
We are getting hints of that happening now.
Good Trading
Steve Peasley
Today’s Stocks & Topics: (F) Ford Motor Company, Interest Rates, Bailout, 401-K.
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Today’s Stocks & Topics: (F) Ford, Automakers, Market direction, (RGNC) Regency Energy Partners L P, (HLND) Hiland Partners L P.
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