Skip to main content

Markets: Looking for direction

After a swoon till March and then upswing, market indices are almost at same levels where they were year ago (and 10 years ago). And given last few weeks sea-saw (one week up, one week down), market is looking for decisive direction. Let's take a look at both sides of arguments:

Optimists:
  • Forecasts: DOW: Above 11000, S&P: 1200
  • We just came from brink of collapse and given so much fiscal and monetary stimulus, GDP growth would pick up and hence profits and stocks should go up
  • Economies of developing countries (especially BRIC) have decoupled from developed economies and should provide necessary growth to world economy
  • Housing market in US seem to be stabilizing
  • Banks seem to be putting their houses in order and may not need additional capital
  • Risk taking is back with recent IPOs and pick up in M&A
Pessimists:
  • Forecasts: DOW: Below 8000, S&P: 850
  • Unemployment is rising and dangerously close to post-depression all time high (10.8 reached in 1982)
  • Foreclosures are still increasing risking bank capital levels once again
  • Consumer spending would be reduced during holidays (due to unemployment)
  • Government stimulus would cause stagflation (no growth, high inflation) repeating 1970's scenarios (add oil price increase to that and we have dangerous situation)
  • Commercial real estate is another big shoe to drop in developed countries. Big asset bubbles are building up in China which would bust in near future.
  • Pessimists are expecting double-dip recession in second half of 2010
Both sides have valid arguments and hence market is not able to find decisive direction. I am more on side of optimists but would forecast DOW around 9500 to 10500 for next few months. Since it is already closer to 10500, I would be cautious in adding new money into stocks. My recommendation would be to take this opportunity and balance the portfolio by moving money into income producing investments such as preferred shares (SFI-D, DDR-G or Vanguard balanced funds) or companies with high yield (Verizon, AT&T, Merck)

I was revisiting my recent recommendation which was is not doing that well (SNV). I have personally invested in this so I know the pain of losing money. So while doing some research, I came across well-written article on SNV. I am still long on SNV and now at $1.70 it is trading 50% lower than my last recommended price. So if you are ready to take extreme risk (caution: you may lose your investment), SNV at $1.60-1.70 could provide excellent opportunity for 50-100% return in 12 months. Last year I recommended Yash (my 11 year son) to invest his pocket money to buy 100 shares of GNW at $1.41 on last year's Black Friday. At that time, GNW was on brink of collapse. It survived and now it is trading at $11

Have a great Thanksgiving Weekend !

/Shyam


Comments

Post a Comment

Popular posts from this blog

Clicks to Tokens: Will 2026 Echo 1998's Boom or 2000's Bust?

My "blogging" was in hibernation last 8 months due to my self-imposed restraint given the environment as well as built-in inertia to get started despite so many interesting events and markets reaching all time highs after taking a big dump around "Liberation Day" in Apr...Around that time I had the blog ready that it would be repeat of Mar/Apr 2020 panic and recovery during onset of Covid Pandemic. The hunch happened to be correct and I was glad that I could keep and take some positions which I am still holding especially around AI theme. But that was then...as 2025 is about to wrap up in 10+ weeks, let's look at what's in store for rest of 2025 and 2026. And what's better time than to start writing again just before one of the most important week on the calendar with multiple key events coming up next week... Fed meeting to decide the course of interest rates - it's almost guaranteed that Fed will cut rates by 25 basis points (2nd time in 2025) and...
Post a Comment
Read more

2026: The Year of Convergence – Melt-up, Moonshots, or Mid-cycle Correction?

Happy New Year! After another period of self-imposed hibernation from the blog—partly due to the festivals, travel, intertia and partly to watch the dust settle on a chaotic 2025—I decided to use the quiet of this New Year’s morning to finally reboot.  Looking back at my October post,  “Clicks to Tokens,”  the hunch about the AI theme held firm. We spent much of 2025 debating whether we were in 1998 or 2000. As we enter 2026, the answer seems to be "neither and both." We have the roaring optimism of the 1920s fueled by "Silicon Spirits," but with the high-speed volatility of the 2020s. So, as the calendar flips, what is in store for 2026? Markets may experience melt-up (S&P touching 8000),  with some moonshots (like SpaceX and OpenAI) IPOs or even see mid-cycle correction bringing down S&P to 6000. That's a wide range and will be decided by Four R's... Here are my thoughts on the " Four R’s ":  Rates, Robots, Rotations, and Real Assets. 1. ...
Post a Comment
Read more

Rockets, Relics & Roaring Markets: The $4 Trillion Crossroads of 1927 and 1999

Happy (almost) Summer! After watching Kevin Warsh get sworn in at a White House ceremony two days ago, tracking three S-1 filings that could collectively hoover up more capital than every U.S. IPO since 2022 combined, and watching 26-year-old stock charts finally break to new highs — it felt like the right moment to ask the uncomfortable question out loud. Are we at a party that ends gracefully, or one that ends with the furniture on fire? The market is simultaneously flashing the neon signs of 1999  and  the orchestral excess of 1927. Most commentators reach for the dot-com playbook. I think the original Roaring Twenties is the better map. Here's why... Assembly Lines to AI Clusters Ford's River Rouge complex was the largest industrial facility on earth in the 1920s — raw iron in one end, a Model T out the other. Steel, rubber, and oil became the picks-and-shovels of the age. GE and Westinghouse were electrifying factories and homes. The infrastructure buildout  was ...
Post a Comment
Read more