"The reflection upon my situation and that of this army produces many an uneasy hour when all around me are wrapped in sleep. Few people know the predicament we are in". George Washington.
Consider What Our Ancestors Went Through. It's all relative isn't it. I worry about the political and economic situation we are in and I also have a few uneasy hours when "those around me are wrapped in sleep." When I read about the American revolution, I realize how much we tend to whine. Stop and think of what these ancestors went through in order to give us the comparatively luxurious lives that even the poorest among us enjoy. Think about feeding and providing weaponry for a ragtag bunch of so-called soldiers who faced the most powerful army in the world. Did you know that they cut down countless trees, dismantled fences, and even demolished old houses and barns in order to have firewood for cooking and warmth. Think about the effect of that on the environment. Did you know that they didn't even have enough gunpowder for every soldier to have a rifle. They even issued spears and asked that "...men who active, bold, and resolute enough use spears in defense of the lines instead of guns." Despite all of these obstacles, George Washington was bold enough that, after the above quote, he made the following statement; "Perseverance and spirit have done wonders in all ages." We may not have leaders of Washington's caliber to inspire us today but we can think about the gifts they gave us and aspire to roll up our sleeves and do what ever is necessary to get ourselves through this man-made crisis.
Be Careful Who You Ask For Help. Particularly if you fly in a private jet to make your request. President Obama asked the CEO of General Motors to resign. I hate to think that the government can do that to the head of a private corporation. On the other hand, you have to expect things like that when you tell the government that you have run into the ground what was once the most successful automobile manufacturer in the world. At that point, the government has not only the right but the obligation to make their bail out contingent on the resignation of an unsuccessful CEO.
Resistance or Support? The Dow Jones Industrial Average is once again hovering around the 8000 level. A friend of mine who is a strong believer in using charts to predict the market told me that once we fell below the 8000 level we could expect it to fall to the 5000 range. Within a few days of dropping below the 8000 "support level" the market dropped to the 6400 range. Not quite 5,000 but no doubt scary. It has since recovered by 25% back to almost the 8000 level. At this point, 8000 is no longer support, it is resistance. This means that it will be difficult to rise above that same level. While, I am not nearly as sold on this approach to predicting the market as my friend, neither do I think we can afford to ignore it.
What Does This "Mumbo Jumbo" Mean? It means that we may have hit bottom at around 6400 and we will have difficulty passing 8000. If you are an individual investor, the best approach is probably to ignore that and cautiously buy good companies here. Items in my own portfolio that I would buy again today are AT&T, Pfizer, Waste management, and Marathon Oil. Stocks that I don't own that I am considering are 3M, Conoco Phillips, and US Natural Gas.
If you want to speculate, try American Capital Strategies, Dow, or Huntsman. All of this last group have been beaten down to the point at which the downside is much lower than the upside. Even if two of the three of these goes bankrupt, the surviving could gain enough to make up for the two that became worthless.
Keep an Eye On the Mortgage Market. With rates in the 5% range it may be time to make a move, especially if you have one of those 5-7 year adjustable products that are adjusting soon. If you have questions, call Susan at 720-449-0200. She can make an appointment for me while I am there next week. Look forward to seeing my Colorado clients then.
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