Market Musings 2007 10 27

Markets are at interesting cross roads. The major market indexes are close to new highs, but rolling over. This is a technical description implying a loss of buyers as market levels reach the new highs. Hence a lot of market participants are reducing exposure to the stocks, mutual funds and ETF's.

I have already increased cash in managed accounts to about 80 percent by selling leading stocks like AAPL, RIMM and others. They look extended and will be going through some healthy corrections.

A lot of high expectations are built in for another rate cut next week, based on trading of several interest rate spreads. Gold Spot prices jumped up also, as reduction of the rates will impact dollar value against other currencies. A lot of inflation is being built in for next year or so. If you travel to Europe, you can feel how expensive things are and how much value dollar has lost.

So, a fed rate reduction may have some short term upside, and it will help financial companies like banks and some export companies like Caterpillar, YUM, KO, PEP, BA and others. But, it will require imports to be more expensive like Chinese goods and Indian Software Services. STAGFLATION will be more used in the future, as inflation creeps into our inflation measures. As you all know, Markets are always difficult to predict. If the interest rates are not changed, there will be a lot of concern about recession etc, although we still have a positive growth rate of the GDP.

I wish I could feel better about some stocks... GOOG has a significant market cap. But, their sales are less than Microsoft's earnings. We all realize that MSFT is cash rich, but, how will GOOG do better than MSFT, as law of large numbers hit Googles increasing revenue and earnings. That is scary, as market continues to focus on earning increases. There is a similar situation for WMT, a giant in retailing.

So, I feel safer with some cash in my accounts. A long term investing attitude looks foolhardy, especially, as I get older. We should invest more percent of our portfolio in foreign stocks or stocks with foreign exposures. Dollar based bonds may not hold value either. If you can hold bonds in Canadian Dollars or Australian Dollars, Indian Rupees or Chinese Yuans, you will be better off in fighting inflation.

Please remember, all of investing is about saving the value of your investment dollars from ravages of inflation in the long term and hoping to make it grow in real terms....

Market Musings 2007 10 21

The markets were in state of flux reacting to somewhat poor news with a lot of emotional gusto, unfortunately to the downside. My earlier posting of 10/14 implied my gut feeling about the market.

The technology sector was less impacted than others. Slow down of economy is uncertain, at best. But future profits in retail sector were dampened by the announcement of Walmart Inc. to reduce prices on some merchandise. Increases in oil prices would imply higher transportation and heating bills. Energy companies may not be spending as much as street expected based on lower spending in domestic oil and gas sectors.

AAPL earnings next week would be positive next week, but, no one can be sure of whether they will meet the heightened expectations of the street. This expectation stuff is pretty weird to figure out at least for me.

So, if you can hold on to your positions for next 60 to 90 days in stocks like RIMM, ADBE and AAPL, you should be amply rewarded. Otherwise lightening up on your equity exposure is still a prudent action plan.

I feel that consumer will have enough money for Xmas and the market will hiccup along till the next earnings till the year end. A lot of optimism prevails during this period and a lot of money flows to the market at year end...

Market Musings 2007 10 14

Markets are close to all time highs and that is worth worrying about.

Monday's Barron has front cover entitled "BLACK MONDAY". This may cause some initial reaction, but, what happened 20 years ago, is not relevant, based on calendar. But, it is still worth noting.

Another article on Seeking Alpha site is worth reading also...

http://seekingalpha.com/article/49696-lack-of-stock-market-breadth-warns-of-danger-ahead

It is pessimistic as the market's breadth is getting getting worse. Last Wednesday, there was a reversal, where a lot of market leaders like BIDU, RIMM, AAPL and others lost 10% of value within a few minutes and then regained the value. I am not sure what caused this reaction, but, I think, it was more than a rumor about BIDU.

So, raise some cash for positions that have stopped going up. Or purchase some puts on weaker indices like IWM or DIA to hedge your exposure to markets.

Best regards...

Market Musings 2007 10 03 PM

Markets
Markets look toppy with SPY and DIA barely moving. Not enough buying and leading stocks are not moving up and tech stocks fizzling out somewhat.

I expect RIMM to post earnings over 50 cents for the quarter, but, I have no idea of the real street expectations... RIMM may go down anyway, unless the earnings are over 55 cents. AAPL looks better situated for the holidays. But, I feel RIMM and AAPL will grow together and both will prosper, one for business market and the later for personal market.

I feel the same way about GRMN and NOK. I think GRMN will solidify and accelerate the GPS market in cell phones. But, watch GRMN for purchase based on charts.

I like Citigroup C and GS both... later being the best in making money in whatever is going on. Citigroup is just has such a powerful presence abroad and is great in credit cards.

Chinese stocks seem to be correcting and may affect our markets adversely.

Best regards...