Trying to figure out where the stock market—or actually stock markets since global markets aren’t closely correlated right now—is headed from here?
Remember that trends always run further and longer than investors expect.
What does that mean at the moment?
- The U.S. stock market will continue to be the best performing stock market in the world into the summer. The Bureau of Economic Analysis report today, April 30, on first quarter GDP numbers didn’t put a period to that trend. Way back in January I said that the U.S. economy would grow more strongly than expected for the first half of 2010. I think that’s still the case. And U.S. financial assets will continue to get the support of cash from investors who aren’t hay with the turmoil in Europe or rising interest rates in the developing world. (Yes, the U.S. financial sector will be a big drag on U.S. stocks but as big as the sector is (17% of the Standard & Poor’s 500 stock index) it’s still not the whole U.S. market.) I think U.S. outperformance will run until investors begin to seriously anticipate interest rate increases from the Federal Reserve and an end to monetary tightening in Brazil, China, India, and the rest of the gang. I don’t see either the Fed raising interest rates or an end to developing world tightening until the end of 2010. Using the rule of thumb that says the stock market anticipates news by 6 months, that leaves me looking at U.S. stocks to continue their run through June. (For more details see my post https://jubakpicks.com/2010/03/19/how-long-can-this-last-the-u-s-stock-market-is-out-performing-the-world/ ) Please note that I’m not calling for soaring returns from U.S. stocks. The U.S. stock market has got its own set of worries. But I do think that this is the best place—in relative terms—to look for stock market gains in the next few months.
- Interest rate increases in developing economies that will keep a damper on stock prices in emerging stock markets are just getting started. Brazil’s central bank raised interest rates on April 29 in the first of what is expected to be 4 to 6 interest rate increases that will run through the end of the year. Other developing countries are either roughly on Brazil’s schedule (India) or still hoping to that they can somehow beat back rising inflation while avoiding raising interest rates (China). I think this will make it hard for emerging market stocks to do much more than march in place until late summer or early fall. (For more on Brazil’s interest rate increase see my post https://jubakpicks.com/2010/04/29/brazil-raises-interest-rates-as-emerging-economies-step-up-their-fight-against-inflation/ For more on China’s inflation battle see my post https://jubakpicks.com/2010/03/26/coming-to-a-wal-mart-near-you-inflation-from-china/ )
- Europe has months to go before puts the Greek/Portuguese/Spanish crisis behind it. Expect more weeks like the last one where markets bounce between despair—the European Union is breaking up—and elation—the crisis is over. It will take at least the rest of the year to play out the question of default for Greece (yes, still a real possibility even after a bailout plan is finally in place) and worries that the crisis will spread to Spain. Spain has to roll over a huge $300 billion in debt in 2010. (Remember that Greece’s need to rollover $11 billion in debt by May 19 has been enough to keep financial markets in turmoil.) The sovereign debt crisis is like an onion—peel away on layer and there’s yet another ready to make you cry. At the speed with which Europe’s leaders have moved in this crisis, markets will be lucky to see a convincing resolution in 2010. (For more on the politics that makes it so hard to end this crisis se my post https://jubakpicks.com/2010/04/26/politicians-in-germany-do-their-best-to-make-the-greek-crisis-worse-and-it-looks-like-theyre-succeeding/ )
If you conclude that this all adds up a tough year for equities, I think you’re absolutely correct.
But it does suggest that if you want the best chance of making some money this year, you should look to U.S. markets in the near term and then to emerging markets at the end of the year.
Took profits and sold back to about 60% cash this morning from position Friday of 45% cash. I see market as having come too far too fast and rounding over the top here. Seasonal trend will probably reassert itself this year so, being May, it’s time to go away. Last year the seasonal trend did not hold, but last year we were sprawled on the floor with no chance to fall further. You can’t fall off the floor! This year the market is on its feet, but staggering drunkenly around the room — looks to me like it’s ready to splat back down on the floor and probably hit its head on the coffee table on the way down. By the end of this week I plan to be almost all cash and holding to see when it signals it’s time to go short.
Been wrong before, might be again, but positioning assets as I see best right now and will accept the results of same.
XY if we wanted your political opinions we could turn on fox news and get them. All Tom said was you can’t just cheerlead your stocks to go up, you have to do your homework or get help. You need to relax. Your posts to ‘only’ Tom, are veiwable by everyone.
YX…
Great observation about the lack of “client” lawsuits against GS! Now, that Buffett is staying on the train, what should that say about us?!! I’m with Ed on this one…
YX,
My rule of thumb on GS right now is: As long as Warren is in it, I’m in it. If it drops, I’ll buy more. This stock has “monster rebound” written all over it.
Thanks, gindy2424 . . .
This is for “Tom” again regarding Eric Holder who is in charge of GS’ criminal case.
When he was asked how he could put the 9/11 trial in NYC, he said he firstly talked to HIS WIFE! Yes, you know he’ll win the case when his wife is his best legal adviser. Now he is busy sending swat team and lawyers to a leaking rig. Lawyers are the best help to stop the leak!
Where do stocks go from here? To me, this is an “All In” moment. I could be wrong.
This is for “Tom” again regarding Warrant Buffet’s comment on GS’ criminal case. It’s amazing.
http://www.msnbc.msn.com/id/36888741/ns/business
More on GS’ criminal case in response to “Tom”.
Look at who is in charge of the criminal case. Eric Holder. What has he accomplished in legal field. Well, he was Clinton’s assistant AG. His biggest accomplishment during those years is sending the little Cuban boy Elian Gonzalez home with aid of a swat team, not court! After that he was said working for a law firm which is alleged defending terror suspects. That will help him prosecuting security fraud! Holder’s latest accomplishment is the 9/11 mastermind’s trial in NYC. I remember him saying on TV that if he was not sure he’ll win the case, he would never put it in NYC. Well, where is the case now? The case seems vanished to me!
Today, Foxnews reported that the Justice Dept. is under pressure to bring out some case. That’s not very good sign. Judges threw out some cases before because pressing someone hurts integrity of the trial, per Foxnews.
Honestly speaking, none knows exactly what happened except those who participated in the deal. But I found it’s extremely interesting that none of GS’ clients have filed suits yet.
However, as I said in my original post that caused ridicule from “Tom”, I am not interested in BP. BP is not GS, nor XOM. The massive tobacco suits were bared by the entire industry which has several big companies. BP seems is there alone now. This is too big for one company to take, even as big a s BP. God bless all those involved.
uhm … Does anyone have anything else in mind besides speculative guessing?
I went shopping on Friday, but, honestly, didn’t find anything attractive enough to buy. RIG looks better and better, but the bad news are still on, and it means that RIG will continue sinking (personally, I do not believe that it was RIG’s fault, you can’t make those rigs 100% fool proof, and RIG does the best job in business of making them as good as they can be). The same is true with GS. I do not see (yet!) the end of investigations, so GS is more likely to go down 20-30%. Then, of course, if nothing more substantial found, it becomes highly attractive.
Anyway, I am about ready to go full cash portfolio by the middle of May. I think Jim is right (and I am betting on this) that things will turn worse this Fall. One of my “personal” indicators is Chinese stock market (SSE Composite Index), which got a strong resistance at around 3000.
For the insights on VALE I think $30 isn’t too bad of a long term entry point. Got some room to run and you won’t be upset for holding this stock through the next 10 years
This one is for “Tom” only.
Tom:
I assume you are a different person from “tom”. You really need to get some help on being a stock critic before you venturing so. You said “ stocks won’t go up simply because (I) cheer lead them”. You also said GS is “cooked”.
Firstly, when, where and which stock did I “cheer lead”? Since you mentioned “GS is cooked”, I assume you meant GS. If so, have you really read and understood my original post about GS? In case you have English deficiency and short memories, let me remind you that I said all the noise surround GS is political including a potential criminal case. If you search on internet, you’ll find I am not alone. Many people including major financial sites had such comments that the GS case is politically motivated by the pending financial bill which is a window dressing for the election year. Even SEC itself is reportedly “investigating” the “timing” of the case, though it may be another window dressing. If you call my such comment on GS is “cheer lead”, then plenty people did or doing that including Warren Buffet! Bloomburg this morning reported that Buffet who invested $5B in GS “supports GS CEO 100%” and I agree with him. I am not sure if you have more credential than Buffet.
Secondly, look what kind of people are “cooking” GS. During the GS inquisition held few days ago which meanly “cooked” GS’s ethic and honesty, those who “cooked” GS are those whose own ethic and honesty are highly in question! (Let’s not even mention one of the inquisitors used potty words on national TV 11 times!) When I watched the whole thing, I asked myself. In between these two groups, who do I choose? I choose Goldman in a heard beat! Goldman executives probably worked their lung out to earn money for their company while these politicians did everything to loose money for their country! A $13T hole!
Thirdly, who is pushing the criminal investigation? John Conyer, the Michigan rep. Who is John Conyer? I know you would not bother to know that his wife just recently was found guilty of taking BRIBE (this is the word used in news report). How convenient it was. She took it, he didn’t! They presumably live under same roof and he knew nothing about her taking bribe! It was reported that this John Conyer demanded a criminal investigation of GS. How about a similar investigation of himself? Giving the fact that his wife was found guilty of taking bribe, so what did he know and when did he know ? (Just borrow some words from the mean stream media when they were grilling Nixon)
BTW, both the senate inquisitor and Conyer are from Michigan which had the worst economy and highest unemployment in the country now. It does not take a genius to understand it. More, Michigan’s governor is reportedly on the “short list” to be considered for supreme court. (Apparently she admitted this to media herself.) Further more, the governor who ran the loosest border now guards our homeland. New formula for success.
More importantly, GS is not GM. GS is the best in the industry and one of the most well run company out there. GS will go through this just like Exxon Mobile, Tobacco companies and MSFT did and come back perform well. Remind you that after Exxon’s 1989 colossal oil spill in Alaska, Exxon stocks went up 1,000% in the 21 years followed according to Bloomburg. Tobacco companies overcame the tsunami of law suits filed by states and continue to be one of the most reliable income source for millions of investors. MSFT endured probably the longest law suit from federal gov. through out the Clinton 8 years, and is still one of the best tech companies out there providing its investor many great returns. I did well last year with MSFT and I bought back again during recent correction! (By the way, Clinton Justice Dept. not only “cooked” MSFT itself, it even encouraged EU and Japan to do the same. Joe Klien, Clinton’s antitrust head, went to Japan and did what to be believed just that. Rallying foreign countries to attack your own companies is unthinkable for the Japanese. Only in America.)
Finally, from pure legal point of view, GS is in better position than the other companies. Let me put it in a simple way, if GS mislead or lied to its clients as SEC and congress accused, why there is no client suits filed against GS! If you lost billions and believe GS had lied to you, won’t you sue it?
However, I did say in my original post that GS stocks will suffer during the time being. Who would not? Giving the kind of extreme anti-business climate out there these days. But people like myself who bought GS recently are in it for the long run. The reality is none knows what is going happen to any stock.
Hey Jim.
I honestly thank you for your ideas and opions on current events and stocks. I use your imput with others to establish my own opinion about the pressures on the market and stocks.
Most of us realize that for you to expose your picks daily for everyone to use for thinking fodder is not only unususl but an act of bravery.
Some of my fellow readers do not understand the difference between constructive criticisim and whining. For that I apologise and want you to be sure to know that all of your readers appreciate you resources and wisdom and continue to read you daily.
CNN has a video piece up on their website. The BP CEO look straight to the camera and says that it’s Transocean responsibility, “it’s their rig”.
Does anyone have an insight on VALE? Should I sell for now? Many thanks.
Some good points Jim and confirms that I should be looking for an exit from some of my winners in the coming couple of months. There is also some selective buying, but on the whole, I hope to end up with more cash. WIsh I would have been like Ed and sold my BP.
NMM is a MLP, but elects to be taxed as a C Corporation so that you get a IRS 1099 and not a K1, and the 2009 div was fully taxable…according to company website…Does this mean its ok to hold in a IRA/401K to shield that yield from taxes? Usually thats a no-no for MLP because of unrelated business rule…anybody got the answer for that?thanks.
interesting lets to users post with the same nickname. I’m the first tom, now tbird
YX, you should get some help with your stock picks. Stocks won’t go up simply because you cheerlead them. GS is cooked.
We should start a Jubak fan forum where we can all post our portfolio info and further the discussions of jim’s postss. Seems to be a number of off-topic threads after everyone one of Jim’s posts.
just a thought
YX…
What did you buy today?? I bought some more GS for the “dollar cost” averaging thingy. 🙂
I did a lot of shopping today. Bought several stocks that I have been eying for a while. Hope it works out.
MXWL reported strong first quarter earnings yesterday…beat analysts expectations, I suspect this is the reason it has gone up.
As far as NMM…I’m hoping that they offered such a low offering to investors to scoop up cash quickly. I think they want to expand their fleet quickly and wanted cash right away perhaps, and were guarding against a further drop in stock prices. Kind of like a price they could guarantee would get scooped up quickly. NMM mentioned they will use the cash to expand the shipping fleet and for merger agreements
Our interest rates will start going up in Spring of 2011.
Can you comments on MXWL?
This pops up 18% today…
bobmregina…
Should we be adding to our NMM shares or just stay in a “holding” pattern??
Thanks a bunch!
BUY, BUY, BUY, today, I did.
You should note that NMM announced earlier today that it has priced a follow-on public offering of 4,500,000 common units at $17.84 per unit. This appears to be what’s driving the steep drop.
indeed, any additional information or analysis on NMM offering would be very helpful…
dear jim,
could y0u comment on the navios marine (nmm) offerring, and the steep drop in share price.