Friday, March 6, 2009

The Path Ahead?

I'd like to say the market is going to turn around eventually. But you can go ahead and look; I've been saying it for awhile. The bottom line is that it isn't happening. How low can it go? Definitely lower. The problem now if you're trying to gauge market strength on the DJIA (which many do, but its a poor indicator due to it being a price-weighted index based. Out of the 30 stocks in the index, we now have a handful of stocks trading in the single digits which limit their effect on the index as a whole) it will be difficult to rally. The stocks most likely to reverse course, the financials, are now priced so low that they cant move the index like the IBM's and Exxons of the world.

But thats just a single example. As a whole, its clear the economy is getting worse. The employment data today cemented that. The political response is one of major uncertainty. I've said it before, and I'll say it now. The market hates uncertainty. Right now, we're drowning in it. The policy response feels like they don't know what they're doing. They are throwing everything that have against the wall, hoping something sticks. Hearing Buffett say the economy is in shambles isn't suprising, but was a little interesting that it came from him. He is a master at naviagting the market, and I listen to what he has to say.

I am interesting in buying, but don't feel like I need to do it yet. What is the catalyst to move us higher, aside from the absurd amount stocks have fallen? The economy is in tough shape, our new administration is spending like crazy, our policy of bailing out failing instituions isn't working, and one of the best reasons, high dividend yields, is being eroded as companies are cutting them to horde cash.

I have no idea how farther stocks will fall, but I can say that this will pass. It could be awhile, but those who are patient here will probably be paid off.

Have a great weekend! Spring is coming!

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