Last week, investors saw themselves staring into the abyss, and nothing was staring back at them. The credit crunch was getting worse. Money Market accounts were headed toward the sub $1 dollar mark. Investment Banks were crumbling. And, it looked as if the US economy was headed for a financial meltdown, and another Great Depression. Oh, but we knew better!
On Thursday, the Calvary road into town as the US Government finally got off their rear-ends and began tackling the problems overhang the financial sector.
The first order of business was to put a ban on the shorting 799 financial stocks. Secondly, a $400 billion fund will help Money Market Funds retain their par value of $1. And finally, $800 billion (or more) will be donated to financial companies to prevent them from writing off additional bad loans.
What has been most impressive is how many foreign central banks have joined in the chorus of reining in manipulative short selling, and now these central bankers are working together to build the opening scene for the new bull market.
While the media was scaring investors, smart money players like Bank of America went on buying spree by purchasing Merrill Lynch .
It reminds of the movie "It's a Wonderful Life". Remember Mr. Potter?
If an investor could only read between the lines, they would see that some investors (Like Mr. Potter) were scooping up bargains while others were panicking.
Bank of America is like Mr. Potter, and Potter wasn't selling, Potter was buying!
-Bank of America buys Countrywide and Merrill Lynch at distressed prices.
-J.P. Morgan buys Bear Stearns.
-Barclays is buying Buy Some Lehman's Assets.
Frankly, I feel like a kid in a candy store. As I watched my quote monitor yesterday, I was saying to myself, "Ooh that looks nice , I'll have one of those, Give me some of that". The market is getting into a range where each new purchase excites me again.
As a result of my candy store state of mind, I added the ProShares Ultra S&P500 Trust (SSO) to the DG ETF portfolio @ $48.13. I pulled the trigger when the VIX index spiked to 42 on Thursday.
Now that the Calvary has road into town, many are asking if the stock market has finally bottomed? I think the odds that the market bottomed on Thursday are probably 80%. Sure there are problems, but history shows that fighting the Fed when they get serious is a losing proposition.
Since the evidence of an economic rebound is not obvious to all, last weeks rise in crude oil prices may incur on final decline to the $85/bbl mark before beginning a new uptrend. The same goes for last weeks rebound in commodity prices. Crude prices are rising on worries that the new debt load from the bailout will further erode the value of the dollar. It will, but keep in mind the manipulative forces are starring down the gun barrel of an important election.
Remember, going into an important election, the big money players want the voters to envision a Utopian society which brings lower energy prices, and low inflation.
Here are our Top 10 ETF's for the week of September 22nd:
1) DBA: Powershares DB Agriculture Fund- .205
2) EWZ: Brazil Index- .171
3) SLX: Market Vectors Steel Index Fund- .152
4) FXF: Currency Shares Swiss Franc Trust- .110
5) EEB: Claymore ETF BNY BRIC- .088
6) DDM: Ultra Dow 30 Proshares ETF- Not Rated
7) KBE: KBW Bank ETF- Not Rated
8) IYF: iShares Dow Jones US Financial Sector- Not Rated
9) PGJ: PS Golden Dragon China Fund- Not Rated
10) SSO: ProShares Ultra S&P500 Trust
After the November elections, I am expecting our commodity and BRIC holdings to rebound sharply. The mother of all short covering rallies drove our two financial holdings (KBE & IYF) up dramatically.
Our newest addition, SSO, is up + 18.92% in two days.
Rumors have been circulating that Wachovia will buy Morgan Stanley. I don't think that will happen. Here is something I do believe can happen;
Goldman Sachs may by Wachovia!
Yes! Now that Goldman Sachs and Morgan Stanley have applied to become banks, The "Glass" in the Glass-Steagall Act has been totally shattered.
Here are our Top 10 Fidelity Sector Funds for September 2008
1) FSCHX: Chemicals
2) FSMEX: Medical Equipment
3) FSCGX: Industrial Equipment
4) FCYIX: Industrials
5) FSPTX: Technology Portfolio
6) FSCSX: Computers & Software
7) FSCPX: Consumer Discretionary
8) FWRLX- Wireless
9) FSRBX: Banking
10) FSVLX: Home Finance
For the Week:
INDU :11,220.96/ -323.00
SPX : 1,242.31/ -40.52
COMP: 2,255.88/ -111.64
-Gold closed at $864.70/oz +100.20 for the week. Last week gold closed at $764.50, and was trading at $802.80 two weeks ago.
-The Commodities CRB Index closed at 359.58, down from 360.01 last week, and down from 367.70 two weeks ago.
-Crude Oil closed at $102.75/bbl up from $101.25 last week, and down from $106.23 two weeks ago..
The "Pickens Plan" seems to be working. The more T. Boone spends on advertising, the lower oil prices go. The oil cartel is scared that Mr. Pickens is educating too many of us common folks.
-The U.S. Dollar closed at 77.67down from 78.98 last week, and down from 78.94 two weeks ago.
We raised our allocations last week by 5% across the board when the DJIA dropped below our 11,300 target. Aggressive, and Moderately Aggressive portfolios should have added another 5% to their allocations when the DJIA broke the 10,600 level on Thursday. Moderate, Moderately Conservative, and Conservative investors are not advised to get fully invested unless the DJIA breaks below the 10,000 mark.
Our current asset allocation is as follows;
80% Equities: (Normally 95%) Aggressive
70% Equities: (Normally 80%) Moderately Aggressive
55% Equities: (Normally 60%) Moderate
35% Equities: (Normally 40%) Moderately Conservative
15% Equities: (Normally 20%) Conservative
