I wrote something early in the week opining that I felt the likelihood of down a lot was now greater than it was before. I still hope I will be wrong but the continued deterioration of just about everything but oil has not made me feel any better.
I will stick with my oft stated plan of waiting for a breach of the 200 DMA. I do not want to try to outguess what may come next, in case I'm wrong. It is important to have some discipline and I think I do.
The Barron's cover story was about ways to invest for yield. I don't quite know what to make of that. Could it mark a bottom for growth? A top for value and yield? Something else? Nothing? I'm not sure, but I would not abandon parts of the market that aren't working. Underweight, sure, but don't be zero weight. If the market goes below its 200 DMA all bets would be off.
The GM situation will have some echo effect, or maybe I should say more echo effect. I have had no interest in the common stock, and still don't, but do you think the company will disappear? It may get worse before it gets better but in a few months or so we will be hearing from some smart people that they bought GM debt into this news and made a lot of money doing it. Of course I could be wrong and the company might default on its $300 billion in debt and go away. What do you think?
While I don't think options expiration caused the selloff on Friday I wonder if the market will unwind with an up day Monday and Tuesday?
Well I've got five 8 hour days of fire training in front of me starting on the 20th. As I mentioned I will be in touch with the market thanks to my cell phone, Sirius and a lot of breaks. I will post to the blog and reply to comments and emails in the evenings.
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3 comments:
About GM--I wish someone would explain to me how GM is a buy here, other than some variation of "dogs of the Dow, too big to fail" stuff. What I see is 1)a finance company, why do you want to own a finance company in a rising rate, inverting yield curve environment? 2)They are also burdened by their side business, having to sell cars to a shrinking market for their product. (3) they are held hostage by the last powerful set of unions. (4) Finally, because of (3),they are the largest end purchaser of Viagra in the US. Does that sound like a business to be in? Someone please tell me how I'm wrong.
So, what will you do if the market goes below its 200 DMA? By market, do you mean S&P 500? Also, do you have a volume criterion attached to that?
As regards the American car manufacturers, I think they are about to pay the price for producing all those gas guzzling SUVs. I hope they get their economic butts kicked. And I hope the Americans who bought these SUVs also bought lots of stock in these companies.
I am not bullish on GM, in fact I remain short the equity, but I think there could be a bull case. First, negativity on the name is huge (this can't be dismissed, often when negativity peaks is when stocks trough). Bankruptcy, if it were to occue (which is NO guarantee) is years off because the company has diversified its sources of funding well and has pushed out maturities of most of its parent debt. It is possible that concessions could be gleaned from the unions (would be tremendous for the stock in my opinion but this event is unlikely in and of itself). GM's retiree population is estimated to peak in 2007, so the health care problem doesn't necessarily escalate ad infinitum. There are lots of new cars coming out from GM and Lutz is respected for being able to reinvigorate auto brands. Bottom line Jaloti, I think you are right but there is a bull case.
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