Sunday, October 19, 2008

The Equity Markets - a glass half full, or half empty?

Equity markets remain very tricky and many of the indicators, which I believe are important are still trending down.
The S&P 500, KBW banking and Baltic Dry indexes all traded below their 10 day moving average.

Some positive points for consideration from the the past week:
  • The TED spread is coming down, but it remains at a ridiculously high level
  • The Volatility index (VIX) spiked to new high and then started to drop.
  • The US equity market has not dropped below its lows recorded on Oct. 10.
  • Morgan Stanley CEO admits that banks need better regulation – I think he is the first industry guy to admit any mistakes, although trusting bankers is very challenging in this environment!
  • Jim Cramer (Mad Money) said that for the first time in 23 years he can't say "there is always a bull market somewhere". Capitulation is always a good thing in a bear market.
  • Too many hedge funds are saying they are heavily in cash.
  • Warren Buffet wrote an op-ed in the NY Times stating that it is times to buy US equities. Note his time horizon is likely different than most and he has a lot of cash in the bank. If you like his strategy, buy his stock - ticker is BRK/A.

Trading will continue to be sloppy leading into the election... but we could get a short term rally.

If your strategy is buy and hold than look at TIPS.

I am taking nibbles, but will exit on any sense of weakness (set stop-loss limits if you are getting involved) - commodities, energy and utilities are areas that seem to make sense - hard assets.

1 comment:

  1. This guy called for regulation last April: http://www.credit-suisse.com/upload/news-live/40747_1001.pdf

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