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Most of this past week the stock market was erratic. News from Asian and American Markets was generally positive, sending the indexes higher, until unsettling news from the European Union let the air out of the tires, resulting in 100 point swings of the Dow Jones Industrial Average, which ended Friday up about 50 points for the week at 10,850.36.
Each day started upbeat and then we would hear about Greek debt, bonds coming due, Germany pushing for IMF participation in any plan to help Greece. Finally when this looked to be settled, we then got news of economic turmoil in Portugal. This activity stimulated me to write the following recent commentary:
- Serious Money: Greek Bonds or High Yield Stocks?
- Greek Debt Exposes European DisUnion
- EU Is Not the United States of Europe
The Dow fell shy of the 11,000 mark and would have passed it if not for the fact that the market is trading on low volume, with many traders ever watchful, seemingly with one foot out the door.
If you have the stomach to be actively reading the business journals anywhere, you must feel like you are being bombarded constantly by a play-by-play announcer going through the latest figures on employment, consumer confidence, interest rates, retail sales, Ben Bernanke's financial tidbits and more. This is then followed up by the color commentators (think CNBC, James Cramer and the like) telling us what it all means.
While the market volume has been light, many of the professional value focused money managers have been buying stock going all the way back to "my pal Warren" waving the green flag in October 2008. Despite the leadership taking place in these corners of the market, the retail investor seems to remain on the sidelines for the most part.
I wonder if there is any correlation between consumer retail sales in general and the return to the market by the retail investor. Do they go hand in hand? The first place to look would be retirement accounts and mutual funds, where I think people are getting back on track slowly. Then there is the rapid growth of exchange-traded funds (ETFs) that are claiming much of the territory previously dominated by the mutual funds and still dominated by the fund companies that have expanded their wares.
We are seeing signs of life in the domestic auto industry, and it was just announced that China's largest car company, Geely has agreed to buy the Volvo brand from Ford Motor (F) for $1.8 billion. This purchase would not be possible except for the fact that the Chinese car industry is booming and record profits are filling their coffers. So car sales around the globe look to improve dramatically and, given last years tragic figures, this will not be hard.
While I have been extremely active in the stock market, taking advantage of the fear stimulating fire sales everywhere, I have not made any large commitments to the retail sector, with two exceptions. Last year I recommended American Eagle Outfitters (AEO) which has doubled, and now Home Depot (HD) is one of my ten picks for the year.
Have you been investing in the Market? Yes, in the last 3 months. Yes, in the last 6 months. Yes, in the last 9 months. Never stopped investing. Don't trust the market yet.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture and planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: He owns shares and options in AEO.| Yes, in the last 3 months. | |
|---|---|
| Yes, in the last 6 months. | |
| Yes, in the last 9 months. | |
| Never stopped investing. | |
| Don't trust the market yet. |
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Reader Comments (Page 1 of 1)
3-28-2010 @ 7:10PM
william lindblad said...
Well, not much of a voting poll, but I always said this area does not have many readers. As you well know I am not one of the market optimists, but on the other side of the coin, this has not stopped "investing".
I agree, information is contradictory and there are those that speak "calm" and others that speak "fire". What is correct? Really, I don't know and have to join the multitudes that are doing "best guess". Good, bad or indifferent it will all come to pass within the next six months. In this span of time the leadership of this country will have to come to grips with the employment issues, housing and mortgages and how they intend to treat Wall St. and the financial system. In a short period of time the federal unemployment subsidies will expire for many thousands. This has been extended many times and it is getting down to a funding problem, like in, where do you get it? Home prices are still static at best and new sales are somewhat contingent on the aforementioned jobs and employment. Who is willing to go out on a limb when they are uncertain whether said "limb" will break? We also have the commercial sector that has a great deal of property that is basically in "limbo" and awaiting the future. If the future is negative, so will be a lot of malls, office space and apartments. All of this adds up to a large piece of change - it is worrisome. I now come to the street and our financial system. As it is the device that created this mess I believe that there will be enough public outrage to bring back the provisos of Glass Steagal along with a host of new oversight and constraints. It is obvious that it will not do an Ayn Rand and police itself.
Yes, there will always be "cherry trees" and cherries to pick, but when there is a severe drought or pathogens there will be far fewer fruit. Three years ago I stated that this "mess" could become larger than the government itself.
The chances seem to be increasing daily. Frankly, I expect a "double dip" as some like to call it, but I also believe that it could be far worse than anyone cares to predict.