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Goldata Financial
Dedicated to above average returns in the stock market.
STOCK MARKET COMMENTARY
November 10,
2008
From Elliot
Goldberg, Registered Investment Advisor, Goldata Financial
Last week, Mr. Market revealed more clues of the future to us. For the first
time since the credit crisis began, volatility measurements were down in a
week where stocks were lower. Gleaned from this is that, slowly, the unknowns
of the market (credit, future earnings expectations, the world as we know it)
are becoming known. Credit conditions continued to improve slowly, but
steadily, allowing market punters to draw a straight line through the last
few weeks of data points and conclude that the lack of credit will not be the
potential problem thought possible just a few weeks back. Future earnings
expectations were brought down a few more pegs as word from just about
every company reporting third quarter earnings (quarter ending September)
anticipate a poor fourth quarter and limited visibility beyond that. The
world as we know it has changed somewhat as all of God's creatures have
decided that they are eligible for money from Paulson's $700+ billion TARP
plan, as GM and AIG, amongst others huddle to make their case for the Fed's
manna. Ladies and gentlemen --- moral hazard is alive and well and we all
have a front row seat! President-elect Obama showed his smarts by
announcing Friday that we do, indeed, have a problem, but it is not his
problem yet, invoking the NMJ (not my job) option available to all
bureaucrats. More to the point, how does all this affect the investment
outlook in equities? The good news is that credit concerns are off the table.
Market participants are now debating how bad earnings are going to be.
Looking back in history for some guidance may not give us the correct answer,
as the scarcity of credit has not been an independent variable in the
economic equation since the 1930's. The good news is that the world
government's spigots are turned on full-blast, allowing us to avoid a
protracted downturn (One caveat here -- if our Congress and new leader decide
to reverse globalization with protective tariffs to "save" jobs,
history does provide a potential warning. The Smoot-Hawley tariff Act of 1930
raised tariffs and contracted international trade as other countries
retaliated, leading many historians to conclude that this act turned the
1929-1930 recession into the Great Depression). Earnings will be awful this
quarter for economically sensitive stocks and, over the next few weeks, they
will probably continue to get beaten up as reality gets priced in (Case in
point - ArcelorMittal, the world's largest steel maker, had its price cut
from $32 to $22 on an earning's warning. Five months ago, this was a $100+
stock). Earnings for stocks of staples such as health care, biotech, and
every-day needs should hold up better. At some point, the prices of
earnings sensitive stocks will not go down on bad earning's news and that
will be our clue that the bottom has been reached. Until then, tight stops
are the rule, with a more confident outlook that the days of the market's
downturn are numbered.
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Goldata Financial manages personal, corporate and
retirement assets that are dedicated to investment in the equity market using
its strategy of combining fundamental and technical analysis that is designed
to limit losses and let winners run. Goldata Financial is compensated
solely by a performance fee, which is based on the increased value of a
portfolio over time. Additional details can be viewed online at www.goldata.com or by calling Elliot
Goldberg directly at (610) 896-9440. The annualized, dollar weighted return
for the short-term trading strategy is –8.64% versus –53.01% for a comparable
investment in the S&P 500 through November 7, 2008.
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