Market swings over 600 points: Why?

Posted Jan 23rd 2008 5:41PM by Georges Yared
Filed under: Forecasts, From the Boards, Indices, Citigroup Inc. (C), Bank of America (BAC), Costco Wholesale (COST), Wachovia Corp (WB), Federal Reserve

The crazy market of 2008 has served up another lesson: don't count on anything! Talking heads this morning were getting ready for the funeral of the American markets. They were getting ready to issue a one way ticket to Federal Reserve Chairman Ben Bernanke. Then, the sunshine came back with a vengeance. What happened?

I spoke to several portfolio managers and trading desks today around the world and the overwhelming consensus was the bargains were staring us in the face. I have written ad nauseam that the American banks were going to throw everything they could into the December 31, 2007 quarter ... and they did. Wachovia Corporation (NYSE: WB) and Bank of America Corporation (NYSE: BAC) both "missed" their respective quarters. I celebrated because if it didn't move, they wrote it off or wrote it down. Banks have rallied in a big way. Be careful with Citigroup Inc. (NYSE: C) because that one is not finished with bad news!

Retailers have been trashed all through the Christmas season to the point of being extremely cheap. As one senior portfolio manager told me "they ain't going out of business". Costco Wholesale Corporation (NASDAQ: COST) is the best American retailer, case closed. The stock has been a rock and was up nearly 4% today.

Earnings season is in full force and it is not the disaster that many predicted. Sure companies are raising caution for 2008, but more importantly, the cautionary outlook is ALREADY PRICED IN THE MARKET!!

Next week, President Bush will elaborate in the State of the Union his stimulus plan and the Federal Reserve will probably lower key rates another 50 basis points. Remember, historically, when the Fed lowers rates, stock markets move higher.

It's been an interesting beginning to 2008... feels likes months and it's only been three weeks!!

Georges Yared is the CIO of Yared Investment Research and the author of "Baby Boomer Investing...Where do we go from here?"

Tags: basis points, BasisPoints, federal interest rates, FederalInterestRates, finance markets, FinanceMarkets, inthenews, retail markets, RetailMarkets, wednesday market rally, WednesdayMarketRally

Print this

Reader Comments (Page 1 of 1)

1-25-2008 @ 8:52PM

jerry rise said...

If the big investment banks write down 200 billion in mortgages, are they writing down 100% of those loans? If they own the paper, don't they own the asset? Doesn't the asset have value? Could there be a recapture of 150 billion in the coming months? Why isn't this being talked about?