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Goldata Financial
Dedicated to above average returns in the stock market.
STOCK MARKET COMMENTARY
November 17,
2008
From Elliot Goldberg,
Registered Investment Advisor, Goldata Financial
Last week, each rally brought hope that this year's long decline had ended,
only to be dashed with the reality of putrid earnings in the near future.
Everywhere one looked (and even places one didn't), the fundamental news was
down --- unemployment rising, Intel's revenue warning and consistent
projections of poorer earnings for Q4. While depressing, this week's news
told us what to do six months ago, but doesn't help us a lick in deciding the
future of equity prices today. The good news is that the market is continuing
to digest the reality of poorer future earnings without closing at new lows
and is pricing it in with less volatility. While Mr. Market has not yet
decided what trough earnings will be, the bounce off the low trading band on
Thursday afternoon (at higher volume and lower volatility levels) must be
respected as a possible low. Congress and the press pillaged Paulson and his
gang for changing direction on the TARP plan this week, but the thought here
is that directly adding cash for equity to balance sheets is the best way to
convince others that you have the cash to survive and be trusted, while
providing a nice return to us, the taxpayers. It also allows traditional
non-banks such as American Express (AXP) to bolster its balance sheet by $3.5
billion dollars and Hartford International Group (HIG) to decide to structure
as a bank to take advantage of cheap (and available) capital it needs to
survive. Like the pilots at the end of the movie "Die Hard 2: Die
Harder", who landed their fuel-starved planes in a terrible snow storm
by following the fire line that Bruce Willis' character (John McClain)
created, others will similarly find creative ways to take advantage of the
cash that TARP is now providing. Mr. Market is sensing this as many
participant's fears gyrate between fear of lower prices and fear of missing
the rally off the bottom. As always, the question is "What to do now?"
Answer: Keep stops tight on positions opened, but do not "sell the
rips" in deference to a possible bottom put in as described earlier.
Each day that passes brings lower 200-day moving averages, allowing us to
potentially repurchase securities, sold earlier, at significantly lower
prices. We will not be fully invested at the bottom, but the short-term
trading strategy’s discipline will limit losses in the event of a breach of
the lower trading band and allow us to get fully invested at lower entry
prices on the way up.
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