"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey
I have to admit; at times I do like watching Jim Cramer’s “Mad Money” show. Notice I did say “show”. I think Jim does a very good job of entertaining people, and this is tough to do with the subject being finance and the stock market.
All the “booyah” stuff reminds me of the hyped up ads you see for regional casino companies. All of the excitement generated on the Mad Money Campus Tour is nothing but hype, and adds to the viewer’s casino mentality.
Over the past 20 years I have heard numerous investors refer to investing in stocks as gambling. Of course all of the people that have said this were not rich or well off.
The hype generated by Mad Money does fuel a casino type mentality, and when bear markets arrive, thousands of gamblers lose millions of dollars.
The example yesterday was Bear Stearns (BSC). I’ve told you over and over that I do not and never have trusted investment banks, but yet, millions of investors still house their brokerage accounts with theses people.
Stupid is as stupid does.
Cramer recommended Bear Stearns when it was trading around $85, saying the stock was too cheap, and would probably be bought out. He was right about the buyout, but he got some investors to buy 83 points above the takeout price.
Now that the credit crunch has hit, and various sub-prime derivatives are being identified in brokerage money market accounts, clients with accounts at Smith Barney (CitiGroup), Merrill Lynch, UBS, Bear Stearns, etc.. are wondering if their money is safe.
When you open a brokerage account you receive a brochures that tells you your account is insured by SIPC, with additional backing by outside insurance companies. I feel comfortable with SIPC, but what if the insurance companies providing additional account security is holding sub-prime derivatives too?
The retest of the January lows are in all likelihood a temporary low since there is no evidence that the bear market is over. In fact, the economic news is going to get worse before it gets better.
The U.S. economy lost 63,000 jobs in February- the most in five years – after coming off of January with a loss 22,000 jobs. The Federal Reserve Beige Book report indicated that economic growth slowed in eight of 12 regions, while the Institute for Supply Management (ISM) manufacturing index declined to 48.3 from 50.7 in January.
Today, February housing starts were down 0.6% versus expectations of down 1.7%, and the February PPI was up 0.3% v. consensus of up 0.4. The core rate was up 0.5 versus the consensus estimate of up 0.2.
Goldman Sachs reported earnings that beat expectations, and said that current conditions offer "considerable opportunities." Boy, I’ll say, with all of the influence they have in Washington, I’ll bet they can get anything they want.
My best guess is the stock market will continue to retest the January lows until those lows are broken. I believe once the Fed is finished lowering interest rates, the stock market will rally, and the bear market will rally into the November election.
Some believe that the welfare package (fiscal stimulus package) will help the economy. I received a notice yesterday on the tax rebate, and found that I was a way too productive member of society to receive a rebate.
I don’t know what its like where you live, but down here on the Redneck Riviera, many of the people receiving tax rebates will buy beer (Anheuser Busch- BUD), cigarettes (Altria- MO), and pick up a few things at Victoria’s Secret (Limited-LTD).
Oh, shucks! I guess I’ll have to go on living within my means, working hard, and saving a large portion of my income for retirement.
I have to admit being fiscally responsible is getting a little old. I have been watching people who have incomes lower than mine buy boats, condos, BMW’s, and go on lavish vacations while I sit here with no debt. Life isn’t fair!
Oh, well… Now that I am highly depressed, I guess I’ll have to use my cash to buy more stocks (BUD, LTD, MO) once the market finishes its bear rally. Oh, woe is me…
