I have set up this web page some time ago and have since made little commitment to keep it up. So my new resolution is to post my current views on this page to keep readers informed. Here are a few things to keep in mind:

I do not believe that anyone can predict the future or select an isolated investment that is going to generate stellar performance. For this reason the reader should keep in mind that although specific investments may be mentioned or discussed, I would never recommend that anyone invest a significant percentage of assets in any one position or into anything where the results appear too obvious. In other words, take everything written herein with a grain of salt.

Also, keep in mind that the opinions in this blog do not represent a solicitation or recommendation of any investment. Before selecting an investment all the literature, prospectus annual reports and other pertinent data should be reviewed and it should be discussed with your financial advisor where appropriate.

Good Luck!

Whenever there was a problem in the good old days the Fed was able to do one thing. Lower interest rates. Greenspan was a hero when he did it after the markets nose dived 22% in one October afternoon in 1987. As a matter of fact, the simple strategy worked so well it was used over and over for some 20 years. Unfortunately,  today it isn't that easy. Dropping rates can mean more downward pressure on a declining dollar and this is not a good for oil prices, imports of any kind, and it has inflationary implications. 

This appears to be the worst market I have seen since the calamity of the late 80's and in many respects it seems a lot worse. We simply have too many things stacking up against the economy and the markets and are not at all close to forecasting a solution. This includes the declining dollar, high oil prices, the sub prime mess, a declining real estate market and a cash strapped consumer...and they are all feeding on each other.

Some feel that this is a buying opportunity because we will eventually get out of this situation and move on. They are right. We will eventually get out. But at the moment  I feel the most important thing to do is to preserve as much principal as possible because we will experience a lot more pain before the markets bottom. I think the investors have been a bit complacent and there is a high probability that their complacency will turn to panic as they start to recognize that this isn't going to end quickly. I will say the Feds (Bernanke's) timing has been excellent this year in adverting a crisis.  But it seems like his options are thin. So we wait for a little breeze and the next rally.

That was quick! Yesterday, we had a 275 point rally in the Dow. This was spurred by some good news from Wells Fargo and may have been fueled by some short covering. There are some new requirements that limit "naked shorting" of stocks and this could be a contributing factor.  

Whenever we have a rally after such a big sell off, investors get the feeling that they are missing out on an opportunity so the whole thing starts to feed on itself. In short we could look for a couple of hundred points more over the next day or so and then most likely hit some resistance in the 11,750 to 12,000 range. At that point, investors will re evaluate where they stand and more than likely take some profits. That's my guess. If profit taking starts earlier and we move to new lows - That is not good. I will then be more convinced that we are headed down to 10,000 on the Dow.

Energy stocks have sold off across the board as oil prices declined. There is a lot of hot money in the oil sector and this money will move out very quickly. I am not convinced however that over the next few years that oil companies are going to suffer much. We still need production even if there is a softening of demand from consumers - which there is. Driving is somewhat optional - staying warm this winter will not be.  Meanwhile the beaten down financials via an index fund are probably a bargain. The financials have to survive for the economy to move forward. In short, the rally is refreshing but way too early to mean anything.  

Summer is over. Nothing has changed. The economy is showing no signs of a long term improvement. Investors have no real direction. Reak estate has had a few pops but there is no sign of a bottom. The list of problem banks has grown. The FDIC is prepared to borrow money from the Fed if it needs to. There is no where to hide and cash rates are low. So we wait and see.

Today we wait for hurricane Gustav to reach the Gulf. There is a lot of concern that it will do a lot of damage to oil rigs. Investors don't care much about people or houses, just oil rigs. More than likely this will not be a huge problem unless there is a real catastrophe. The good news is that oil prices have dropped over the past month due to speculators taking some money off the table in the midst of a global slowdown. It is anyone's guess as to what could happen over the weekend.

I have been asked many times if oil is still a good investment. I have always viewed it as a hedge or an offset in a portfolio. This is true with all of the oil, materials and commodity industries. I don't think the demand for oil and commodities is going to evaporate any time soon. The markets got ahead of themselves and now they are retrenching into what will end up being more reasonable and realistic levels. The hot money will pull - and has pulled the plug on oil stocks but I don't think we are going back to where we were  three or four years ago. So I think that the oil and commodity industry - longer term (years) will continue to be a good investment and should be held only as a portion, say 10-20% of an overall portfolio. If oil is doing poorly, chances are the lower energy prices will take pressure off the economy and that should ultimately be good for everything else. For now, we will see some gyrations due to the storm and in a month or so we will hear all the talk about how cold the winter will be.  

My view on the rest of the markets is about the same. The financials are the best buy as a contrarian because no one is buying them. Health, med and bio have been in the doldrums for a long time so I feel pretty safe there. Finally, there is a ton of cash on the sidelines and also a pile of short positions. If we get some sign that the banking situation has bottomed - the markets will make some huge moves upward based on a lot of pent up cash rushing in at the same time. 

So the word of the day is "patience". At least lets get through the weekend and lets see what the big money does when it gets back from vacation.