Goldman Sachs (NYSE: GS) sure is a downer. I was starting to feel a little better about the market when it decided to say some bad things about the upcoming earnings season. Thanks a lot, Goldman! According to this Bloomberg article, Goldman believes that earnings for companies will be, overall, very bad, and that the broad market will be brought down by them. Already, reports by General Electric (NYSE: GE) and Alcoa (NYSE: AA) have rocked Wall Street -- and not in a good way, let me tell you. Goldman's David Kostin is, in fact, disagreeing with other analysts who believe that the quarter won't be so terrible; he also thinks the S&P 500 will be lower by the end of the year by perhaps 6%.
So, what does this tells us as investors? First of all, let me say that I think the guy has a point -- when you see GE miss like it did on 4/11, you've got to take notice and be on your guard. In other words, if you're planning on doing some cute buy-a-stock-just-before-it's-about-to-report trading, be extra careful! Now is not the time to take ridiculous chances with investment capital. If you are going to do it, make sure you do it with extra-safe stocks -- then again, if GE wasn't a worthwhile trade in the category I just described, what the heck qualifies for "extra-safe" this quarter? Probably not much. All of us have to realize that the recession is, most likely, real, and that stocks are going to be difficult equities to own.
Stocks that have run up a lot, or even a little, before they are about to report would be ones to be extremely wary about. Pick your spots carefully, but I kind of like the strategy I employed with GE ---- by luck, I got in when it dipped quite low on Friday. Buying a pullback could be a nice set-up for gains later in the year when the market hopefully improves.
I'm not trying to be a downer, either, and I know those addicted to playing the earnings game will go on playing it, bad quarter or not. I'm just saying stay sharp, and think twice before pulling the trigger. I definitely prematurely pulled the trigger this year more times than I care to think about -- with GE's legendary earnings miss now in the history books, it's time to be as proactively smart as possible. One last thing to take away from this Goldman opinion -- if you're in the S&P for the long term, either through a mutual fund or an ETF, definitely consider some additional dollar-cost-averaging purchases -- nothing wrong with getting lower prices on a long-term investment!
Disclosure: I own shares of General Electric; positions can change at any time; please perform your own due diligence, and do not take anything said here as any sort of personal advice.
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Reader Comments (Page 1 of 1)
4-14-2008 @ 4:03PM
nrg said...
Can anyone tell me the meaning of letters TTM next to P/E ratio?
4-14-2008 @ 4:06PM
Sheldon L said...
TTM = Trailing Twelve Months
4-15-2008 @ 6:06AM
Lauren said...
Thank you for the heads up on the Goldman call. What a bummer for the nation's investor class, which should be all of us. I suppose we could blame the failed policies of the George W. Bush administration, or the lack of business ethics and leadership within companies like Bear Stearns, and many more yet to be named. Shame on them for harming the US economy and our security. Perhaps we will look back at the current financial crisis that started in 2001 and wonder if it was worse than 9-11. However, we can now begin to demand more from our government, especially in an election year. We need a new, fresh slate of representatives with the fortitude to bring forth a balance budget that includes provisions for paying down the national debt. We need to avoid getting entangled in foreign wars, as George Washington warned us to avoid. We need to be wary of the military industrial complex, as President Eisenhower (General Dwight D.) explained.
All of the current candidates for President have been part of the Congress that has created the Federal fiscal problem that we have. To create change, those candidates will need to make a commitment to move away from the failed policies of the past. I am not convinced that they can be successful, and therefore, we may likely continue to suffer economically.
A suggestion? Identify an entrepreneur and help start a business,,,,,maybe that person could be you! New jobs, revenue and industry -- that is what this country needs more than anything else!