Selling Causes More Selling/Turmoil in Asia

Sometimes, a belief that there will be a severe recession can cause one, as fear causes an abrupt reduction in aggregate demand.  Hedge funds are being forced to liquidate to meet redemptions and margin calls.  Funds with leveraged portfolios are having to sell into declines which causes more declines as buyers head for the hills to bury their cash.  I mentioned in a  post  last Wednesday that I suspected the Nikkei 225 to break its 2003 multi-decade low of 7,832.Japanese Market  I did not expect it to do so in a day.  Last night,  this average fell 9.6% to 7649.  The other major Asian markets just added to the fearful tone, with Seoul down 10.57% and India down 10.96%.  Investors around the world are throwing in the towel.  I have noted in these posts that a recession was inevitable even if the financial system could be saved by the radical and innovative measures taken by the world's central banks and governments. I also believe that the fall in equity prices already reflected a severe recession, lasting up to 1 year. I have also said that the U.S. indices may test the lows of 2002. Sunny and Dark at the Same Time   However, continued declines like we are seeing today is consistent only with a more dire forcast of future economic activity and a further decline than I now anticipate.   Until we break the lows of 2002, I will continue to nibble.  I will stop when and if the low is broken and simply wait and see.

Relatively speaking,  I thought the earnings release from Ingersoll Rand was okay, but the market is spooked by the lower forecast for 2009 to an EPS of $3.35 to 3.55 per share from the analysts' estimate of  $3.58. Ingersoll Rand Announces 2008 Third-Quarter Earnings of $0.72 per Share from Continuing Operations; $0.99 per Share Excluding One-Time Items: Financial News - Yahoo! Finance  I would expect that the lowered estimate might be hard to reach next year at the lower end.  So what?  The stock has already fallen from around 55 in October 2007 to less than 17 today, so some might say that is more than enough adjustment for a tough year to come.  Others will disagree and continue to sell into weakness.  In any event, the stock price has given up more than a decade of gains, with the current level last visited in 1997.

I was fortunate that no orders filled yesterday.  I noticed that some Trust Certificates are under selling pressure today and I may change my strategy for today based on an opportunity arising in that area.  Being an old man, I feel more secure with a senior investment grade bond yielding over 16% than with a common stock yielding five per cent with chaos running amok.

All of my recent common stock buys are under water but they are small positions, still building slowly in all of them to 100 shares.    Late today, I may bring Intel up to 100 shares or add a tad to Valero.  Gannett is another one that has already been beaten into a pulp prior to today.  Gannett's earnings, while down of course, were not terrible.  It is now trading down almost 9% to 8.8. Yahoo! Finance  MarketWatch I said that this was a controversial selection but I will add to it for the reasons mentioned in my prior post.  OLD GAMER HATCHES A PLAN AROUND 1 P.M TODAY

If this decline accelerates, I will go into a cocoon until the VIX falls to below 20.  Today, it is currently up around 17% to over 79, a fear index that now generates fear and anxiety just looking at it. ^VIX: Summary for CBOE VOLATILITY INDEX - Yahoo! Finance