As market makers stay on the sideline after covering short positions, the forces to manipulate market become diversified. Some day traders and individual speculators continue to speculate a beaten down market. Some day traders and individual investors take quick profit on rebound when market is over beaten. There is huge capital flow into equity stock market on temporary basis. It creates turbulence, not market support. Since market participants do not have confidence to increase holding, market will remain at depressed level as traders are buying and selling stocks for short term speculation.
Hiding in Cash. Is It Time to Get Back Into the Markets?
As you no doubt recall, in the days prior to Irene's arrival we experienced another storm of sorts — a drenching downpour of media coverage predicting devastation and chaos in the storm's wake.
But here's a question: How much of that coverage focused on possible destruction in inland areas in Vermont, New Hampshire and upstate New York, where swollen rivers and bloated streams have inflicted massive property damage and even resulted in loss of life?
The answer, of course, is practically none. News reports focused almost exclusively on coastal areas. Which makes sense, as those areas are most vulnerable to hurricanes and such.
So what in the name of Al Roker does this have to do with your question about when to move your retirement savings back into the markets? The answer is that, as with tropical storms, things don't always play out in the economy and the markets the way we expect.
As investors we may feel that we know what lies ahead and that we can use that knowledge to avoid losses or rack up gains. But that confidence is unwarranted, and acting on it can lead to investing decisions we may later regret.
Take the downgrading of U.S. debt by credit-rating firm Standard & Poor's last month. In the days and weeks leading up that unprecedented event, the consensus was that a downgrade would lead to higher interest rates as investors demanded a higher premium to hold Treasury securities that no longer held S&P's triple-A rating.
But did that happen? No. Far from shunning U.S. debt, investors flocked to it as a safe haven in a troubled world, driving yields down. So anyone who bet against Treasuries on the theory that the downgrade would devastate their value bet wrong.
My point is that when it comes to investing, there are so many variables that determine the prices of stocks, bonds and other investments that it's virtually impossible not just to predict what might happen, but to know how investors will ultimately react to whatever does happen.
Stocks Are 25% Undervalued For Those Who Can Wait
As the market struggles to come off the morning lows, Rod Smyth, Chief Investment Strategist at Riverfront Investment Group is not losing sight of the fact that US stocks are cheap, specifically "25% cheap to their long-term values." The emphasis there is on long-term.
Smyth thinks Europe is going into recession and the US is entering a period of stagnant growth, regardless of how we label it.
Rest easy, bulls, there will come a point at which earnings guide-downs are priced into the markets. We're just not there yet. Smyth is in the popular camp where long-term investors are holding cash and picking away at Blue Chips as markets drift lower. "In many of the great companies you're getting dividends higher than you can get in cash or US Treasuries," he says, echoing the mantra of the long-term investor.
Yahoo fires Bartz as CEO, names CFO to fill void
Yahoo Inc. fired Carol Bartz as CEO Tuesday after more than 2 1/2 years of financial lethargy that had convinced investors that she couldn't steer the Internet company to a long-promised turnaround.
In a Tuesday statement, Yahoo said it is undergoing a "comprehensive strategic review" in its latest effort to give investors a reason to buy its stock but didn't offer details.
With its stock sagging and its management in limbo, Yahoo could be more vulnerable to a takeover attempt by a private equity group or another opportunistic bidder attracted to what remains one of the Internet's best-known brands. Microsoft offered to buy Yahoo for $47.5 billion, or $33 per share, in 2008 only to be rebuffed.
Mobius to Obama: Don’t Follow in FDR’s Footsteps
For starters, Mobius believes the U.S. will avoid recession. "Probably the most important reason is about money," he said from his Macau hotel room. "There's a lot of money sloshing around looking for a home." And with the prolonged weak dollar, the U.S. is looking very attractive to global investors. "Things look pretty cheap in the U.S., whether it be property, whether it be companies... And labor rates look cheaper, and that is going to attract manufacturing investment."
"The only blind spot and negative factor, of course is the U.S. government and the incredible amount of regulation that is being imposed on small and medium sized businesses in the U.S.," Mobius says. He literally wants to hear an admission from the president that his administration has imposed too many regulations on businesses and he will move to eliminate them and make it easier for Americans to do business.
Given Mobius' outlook, we will avoid recession, but watch out for inflation."With the amount of money that's been pumped into the system, there's no question that we're gonna see inflation coming around the corner," he says. And in the current environment, "you could end up with stagflation if the economy is not growing and you have inflation."
But ultimately, Mobius does not think the world is facing stagflation, particularly in emerging countries. And this just may be our saving grace.
Obama to Challenge Republicans on Jobs
President Barack Obama heads to the home turf of his Republican congressional adversaries tonight to lay out a choice for voters as much as a plan for lawmakers.
After partisan disputes dragged out negotiations over the debt limit, Standard & Poor’s lowered the U.S.’s credit rating to AA+ from AAA on Aug. 5. The rating firm said the government is becoming “less stable, less effective and less predictable.”
Even so, the government’s borrowing costs fell to record lows as Treasuries rallied. The yield on the benchmark 10-year Treasury note fell from 2.56 percent on Aug. 5 to 2.02 percent as of 9:32 a.m. today in Tokyo.
Some Hedge Funds, to Stay Nimble, Reject New Investors
Since the financial crisis, big hedge funds like Paulson & Company, Millennium Management and Och-Ziff Capital Management Group have not turned away money, eagerly collecting billions of dollars from investors who have tended to stick with the industry's marquee firms.
The situation makes Anthony Bozza all the more unusual. With assets swelling, the hedge fund manager is closing the door to new investors at his four-year-old firm, Lakewood Capital Management. In a little more than a year, his fund has grown from $200 million to $900 million, according to investors in the fund.
But three years later, some small and midsize managers are flourishing, attracting assets at a rapid rate. Rather than risk their returns, they are just saying no to new investors.
Why Every Investor Needs to Time the Market
The value/yield camp tends to view volatile markets, such as that of 2011, as a chance to add to a portfolio while flighty "traders" panic in and out of stocks.
The Demise of the EU
"If one of these countries defaults on the debt, it's probably priced in," he claims. While acknowledging a default would likely create some disconnects in prices of debt and financial stocks, he believes the impact would be muted and fleeting.
Housing
Pavlik's view on housing is simple: "If you're looking at housing as the savior for this economy, it just isn't going to happen."
The Prospect of Strong Corporate Balance Sheets Leading to Hiring
This is a classic glass half-full or half-empty debate. Pavlik sees insanely strong balance sheets as a coiled spring of investment possibility if and when there's more economic certainty. I see the cash on hand as an indication of the bizarre, un-American, and destructive hostility between this country's corporations and Washington, D.C.
Volatility
Just as all roads once led to Rome, all current market debates lead back to volatility. Pavlik points to the information age's insatiable desire to flood the world with news as the chief cause of investors' fascination with market fluctuations.
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