Wednesday, October 22, 2008


Today, reading the financial news, I was struck by the fact that all of the worries now were about earnings and the recession rather than a collapse of the banking system and the credit crunch. An earlier post from October 14th made the point that Wall Street would certainly find a new worry-earnings. Time to Sober UP  This is what I said then: " Once the euphoria subsides about the radical and innovative plans to save the financial system from collapse, the forces at work on Wall Street will find something else to worry about and they will not have to wait long to find it this earnings season as witnessed by what is happening to Pepsi today."  

Personally, I believe that most stocks have already gone down enough to compensate for tough economic times. A bear market can over shoot on the downside just like the bull market of the 1990s went way beyond rational levels on the upside.  The emotions of fear and greed will always be more powerful forces than cogent, logical thoughts.  

This concern with earnings will likely continue into the first quarter of next year. Once investors see that the banks are lending, and the credit crunch has eased, with no more major failures of financial institutions after the passage of many weeks, then at some point next year they will start to look to the future rather than the present and stocks will start a new bull market. 

I was premature in starting back into the emerging markets.  That is why I am taking baby steps.  With another 25 investments or so like I made the other day I will be at a full position in the emerging market category.  So, I expect to be early with some of them.  The key for me is to sell into a strong rally and start buying back after a severe decline, which is what I have done so far.  This means that I will never be selling at the absolute top  (unless I just get lucky) or buying at the absolute bottom.  Without checking, my sells in emerging market stocks occurred in two separate years, 2006 and 2007, so my buys will be similarly spread out.

Since I own ING preferred issues (IND and INZ), I read this WSJ story that concluded that ING received money from the Dutch government on favorable terms.

I do not intend to add any shares to my current position in these preferred shares due to their hugh rally off recent lows.  I will likely keep one of the two recent purchase on INZ because it pays me, as I noted in a prior post, 22.9% annually, in quarterly installments, based on my purchase cost.Some Nibbles Got Filled: JZE, PJS, INZ and FAX (from Oct 10th). The higher cost INZ shares using FIFO accounting were sold for about a 40% gain in a few days.

I will always narrow my focus for the day, looking for a few select opportunities.  The screaming opportunities in Trust Certificates has largely evaporated ( for a discussion of what a TC is see Trust Certificate JZJ AT & T BOND and you have to scroll way down through the political discussion to find it).  Instead, I am looking today at first mortgage bonds that trade as securities on the exchange, one emerging market stock, and a possible nibble at 1 of about 5 large tech names that I previously mentioned that I would be doing gradually of course.

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