"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey
It's true. the old Yogi Berra saying, "It Ain't Over til it's Over!" applies to the stock market and the financials today as the Swiss banking giant UBS said it would write-down another $19 billion and announced the resignation of its Chairman Marcel Ospel. Over the past 9 months, UBS has taken $40 billion in write downs.
Lehman Brothers raised $4 billion with the issuance of a 7.25 percent convertible preferred to raise capital. There was no word as to who the buyers of these securities were.
In another April Fools twist, many investment banks are trading sharply higher as the brokerage brotherhood is suggesting "the worst is over", and the "bottom is in".
I am not smart enough to know if we have seen the bottom or not. This is why I like to use the time tested approach of "dollar cost averaging".
What I do know is what I have said many times before;
"Throughout our history, the track record is clear. Solutions to major problems always appear".
Yesterday, an unofficial branch of the US Government (Pharmaceutical Industry) was called on the carpet after a study released at the American College of Cardiology conference revealed that Schering-Plough and Merck's cholesterol drugs failed to work any better than cheaper generics such as Zocor.
I challenge you to count the number of drug ads as you sit down at night to watch you favorite TV programs. It is astounding! The Pharmaceutical Industry has a drug for everything and a cure for nothing.
After spending trillions of dollars on research, we still do not have a cure for cancer, and the best treatment options for the disease are the same as they were 40 years ago; Chemo and Radiation.
Take for example the founder of the natural gas exploration and development company Occidental Petroleum (OXY), Armand Hammer.
Prior to starting Occidental, Hammer attended medical school at Columbia University. His family owned several drugs stores while he was in medical school, so the bright young man knew a thing or two about pharmaceuticals.
Late in life (early 80's) he was diagnosed terminal cancer and only given a few months to live. Hammer who was criticized for being a socialist went to Russia for medical treatment. After returning from Russia, Hammer lived to age 92 and eventually died of bone marrow cancer.
According the article on Hammer in Wikipedia, "Hammer appeared on The Cosby Show, saying that a cure for cancer was imminent." This was over than 18 years ago, and...still no cure.
The Start of a New Quarter
Today is April Fools Day, and the first day of the second quarter. Is today's rally the start of a new bull market? Is the bottom of the market in? Are happy days here again?
I don't know! What I do know is this;
1) The Fed has taken strong action to stabilize the economy and the credit markets. This action has prevented additional selling in the markets, and has given hopes for a cure to what ails us.
2) The 1270 level on the S&P is key support, and the 1385 level is key resistance.
3) As oil prices drop and commodity prices trend lower, inflationary pressures will subside.
4) Unless housing prices stabilize, economic growth will be hampered.
5) Near term rallies are expected. Sentiment is negative, and pessimism and skepticism has soared. These are all building blocks for a a near-term bottom that could rally stocks towards important resistance levels.
While the Financials remain vulnerable to negative news, we believe they should be accumulated. Those who wish to venture into real estate should consider REIT's instead of condos, land, etc...
With REIT's you don't have to worry about insurance, mortgage payments, property taxes, or bad tenants.
I am continuing to dollar cost average into this market, but I always keep in mind "It Ain't Over til it's Over!"
