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Goldata Financial
Dedicated to above average returns in the stock market.
STOCK MARKET COMMENTARY
January 26, 2009
From Elliot
Goldberg, Registered Investment Advisor, Goldata Financial
Last week, MLK day shut our markets on Monday, but the action was overseas.
Word came from the old country (England) that their banks required immediate
infusions of capital and, when volunteers were requested, the private sector
all took a step back, leaving the British government as the only one that
“stepped forward”, now proud majority owners of the British banking system
(previous equity owners were hit significantly by the dilution of new shares
issued). Investors on this side of the pond started putting two and two
together and decided that maybe, just maybe, this nationalization scenario
was closer to us, rather than farther. When State Street (STT), a
custodial-type bank that was supposed to be somewhat immune from
capital-depleting behavior, confessed to capital-depleting behavior, the
floodgates were open and panic selling hit the financials (If you’re still
asking “How much lower can the financials possibly go?” the answer is “It is
possible to go lower”). By Tuesday’s market close, all seemed lost when IBM
announced a surprising earnings beat, which buoyed the markets through
midweek along with word of insider buying by the CEO’s of JP Morgan (JPM) and
Bank of America (BAC) (Let’s hope this knife-catching exercise will be more
rewarding than previous attempts by others.) Thursday brought mixed earnings
results from Microsoft (MSFT) and Google (GOOG), but the intriguing data for
the week was housing starts, which were a record low 550,000. This, along
with the assumption that 750,000 to 1,000,000 houses are lost every year,
means that the supply of housing is finally coming down. Economics 101 tells
us that lower supply leads to higher prices, the real panacea to our
financial problems and a promising light at the end of the tunnel. In the
“blind squirrel catches the nut” category for this week, most managed
portfolios were exposed to gold’s breakout Friday, leading to some positive
returns in a down week. Going
forward, the gold positions established will be allowed to run, as history
has shown that risk/reward on breakouts like this can be very well rewarded.
The private sector continues to wait for the government to set the rules
going forward. When government “solves the problem” and is out of the way,
private capital will handicap and proceed, highlighting this year’s winners.
I’ll attempt to ride these winners on their way up.
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