Adam on the markets

What a difference a day makes. Yesterday was gloom and doom. Today the markets bounce back. It is really hard to keep up with how the talking heads want us to feel about the markets so I have stopped trying. If you tuned in on Monday you would have thought that a huge correction was inevitable. And so they talked us through a 2.5% decline only to watch it made back in part today.

The market is starting to recover and that is a bad thing if you are a trader. Traders make money on volatility and that means the market must whipsaw around. The last few months of steady rising stock prices are not so much fun for traders who make money on the buy and sell side. All markets will have good days and bad days. In this market the good days will out-number the bad. Don’t be fooled into listening to the people that got it all wrong before, get it all wrong again. Hopefully you were not conned into selling yesterday only to watch it come back to today.

Be an investor and not a trader. I have never been very good at timing the markets so don’t take advice from me on when to buy and sell. However I can tell you this. Never in the history of modern economics has intervention ever worked precisely. Markets always swing too far to each extreme. It is fair in my mind that the stimulus has been overdone and the byproduct of that will be- rising prices, driven by rising commodity prices and therefore inflation.

My bets are on the things that a recovery is made of. Raw materials like aluminum, commodities like copper, industrials like Caterpillar. As I said before, I am not sure when the market will turn higher or lower. I do know that two years from now the market will be higher than it is now and therefore it is a place I want be.

Warren Buffet was quoted as saying, “Be greedy when others are scared and be scared when others are greedy”. Right now I am optimistic that stock and commodity prices are going to continue to rise because the economy is coming back. Since I feel the stimulus has been overdone, the market will have to reflect that as well.

So, ignore the pundits that talk about the markets out pacing themselves. Maybe they have. However since you invest with money you don’t need immediately, I am perfectly happy watching the investments grow over the next 2-3 years. Patient people will be rewarded handsomely.

Recovery is in the works

Through the time of the housing debacle there have been two properties that stand out to me as beacons of how the economy is progressing. I have good news. In the last three days, both have been sold. The first one is the house next to me which has been on the market for about five months. The other one is a foreclosure on Hunter Mill Road. There was a huge GMAC foreclosure sign in front of it that has just been amended to say, SOLD. It is always darkest before dawn and I am gla dto say that whatever you see heppening in the coming weeks, good news is on the way.

Financial meltdown

The stress created by the market meltdown is beyond compare. It is very painful to watch your personal financial security evaporate in front of your eyes.
There isn't a single asset class that has been safe by the market demise- stocks, bonds, oil, gas.
They key issue is a crisis of confidence. Now that the fed has injected the capital, the go foward problem is fear. At this time, history is the best teacher. History shows us that we'll come out of this OK. It will take time. Some say years however, we'll be ok.
The Oracle speaks... Warren Buffet says, "Be greedy when others are fearful, and fearful when others are greedy." For me this means that it just about the right time to get back into the market. My suggestion is... Real estate. This asset class has a strong chance to outperform the market and is a good hedge against inflation. My sense is that all of this liquidity in the market will lead to a period of hyper inflation. That in turn is good if you have debts that will erode in value over time.

Financial Debacle

It is hard to have a 504 point drop on the Dow and not make at least some comment on my Blog. Over the course of the last 48 hours we have seen two wall street icons wiped from the face of the earth. Lehman Brothers has declared bankruptcy and Merril Lynch has agreed to be purchased by Bank of America. This is also on the heels of the federal take over of Freddie Mac and Fannie Mae. And how can we forget, the sale of Bear Stearns. I wonder how we will look back on this in the future. Perhaps this is just the beginning of a long, slow economic debacle. Maybe these events signal the final capitulation needed to mark the 'bottom' of the market. The fact remains that tens of billions of dollars of wealth have just been erased. That is college educations, and pensions, and 401(k)'s and life's earnings all erased in a matter of days. So what will become of the throusands of people impacted by this? It is hard to say really. However, the American spirit fights on. At least now, you can start to get some serious comments out of McRove Palin and not just ridiculous comments about lipstick.