Thursday, March 13, 2008

No Time to be a Hero

Stocks have further to fall, although its time to start paying attention in case we see any overreaction in particular stocks we like. There is little good news out there right now. If we start to see multiple hedge funds fail, that could trigger even more selling. The Fed's intervention helped banks, but won't fix the overall problem.

The thing to be aware of with the media is predictions. They're all predicting "when is the bottom." It's not that important. They won't truly be able to call a bottom until long after anyway. The key is finding opportunities in the market that are given to us by other factors. For example, a strong company's stock being discounted because the entire market is dropping.

I saw a video interview with former AIG CEO Hank Greenberg. One thing he said really stood out to me. He said we need leadership right now, and we're not getting it. We need a president to talk to the American people and inspire them. Tell them we are still a great nation and can achieve anything we put our minds to. Reagan was so successful with that. People feel so disconnected right now. The media has beaten us down, and there is no one telling us that things will be okay. Thats what we need in a president, and I think this is why a fresh, inspiring person like Obama is having so much success.

8 comments:

Dan said...

Mike,

Do you think seeing a Democrat elected to the Presidency will see a larger booster shot to the economy compared to McCain being elected?

Dan said...

Another thing

What do you think about loading up some homebuilder stocks for the long term? I got into some Pulte Stock PHM a while back and have seen some good return so far. Holding for a few years should hopefully double.

Michael said...

I think a Democrat could help and hurt the economy. They would likely spend a lot of money in infrastructure and roads, which would help the economy (companies like Caterpillar). They also would be likely to raise taxes on dividends and capital gains which have a direct negative impact on investing. Also, both Democrats have talked negatively about NAFTA and may become more protectionist when it comes to trade, although that is probably just campaign rhetoric, as people like to hear that they won't ship jobs overseas. If McCain is elected, taxes will stay where they are which is positive, and defense stocks should continue to do well (NOC,UTX,BA,LMT). But he will continue the war which has become very costly. I do like that McCain will probably clean up earmarks and pork barrel spending. So all candidates present positives and negatives economically. Also, keep in mind the first couple of years of a new presidential cycle usually don't do well in the market, because the market doesn't like change and uncertainty.

Michael said...

I don't follow homebuilders much. The key is making sure the company is holding up ok. Take a look at their debt levels, and what they are projecting for earnings. 2008 should continue to be tough for them, but long term, these stocks should more than double. They are trading well below book value, and the market will eventually pick up again for them. If you're willing to hold through some ups and downs, you should come out well.

Dan said...

Don't follow homebuilders Mike?! You're in Real Estate! By the way, this is Donna's nephew in Minneapolis. Nice to hear from you.

Michael said...

Oh, hi Dan nice hearing from you. Yeah, its funny that I haven't followed those stocks. It is probably a good time to start looking at them, as the sentiment on the real estate market is so negative. What's new with you?

Dan said...

I work in Foreign Exchange at Wells Fargo. Love it so far.

Michael said...

Thats sounds cool. Do you work out of MPLS? That's an exciting market, following a lot of international markets I suppose.