When HUN was making its low below $3, I didn't have the guts to buy as I
had already bought a little DOW and a lot of ASH and was getting my butt
kicked good. Now I'm back in cash--can somebody make the case why I should
buy HUN rather than going back into DOW.
I wouldn't be in a rush to buy anything at this point. Yes Lind's arguments about going against the grain seem valid but we are in very unusual dire times of which we have never seen before. This is a new world and the USA has lost much of it's staying power as a major economic force. I wouldn't buy back HUN until we see the mid $7 range or lower. The markets do not like uncertainty and we are enmeshed in just that, general market angst exacerbated by the media and the internet.
On Tuesday August 24, 2010, 2:38 pm EDT
Positive gross domestic product readings and other mildly hopeful signs are masking an ugly truth: The US economy is in a 1930s-style Depression, Gluskin Sheff economist David Rosenberg said Tuesday.
Writing in his daily briefing to investors, Rosenberg said the Great Depression also had its high points, with a series of positive GDP reports and sharp stock market gains.
But then as now, those signs of recovery were unsustainable and only provided a false sense of stability, said Rosenberg.
Rosenberg calls current economic conditions "a depression, and not just some garden-variety recession," and notes that any good news both during the initial 1929-33 recession and the one that began in 2008 triggered "euphoric response."
"Such is human nature and nobody can be blamed for trying to be optimistic; however, in the money management business, we have a fiduciary responsibility to be as realistic as possible about the outlook for the economy and the market at all times," he said.
The 1929-33 recession saw six quarterly bounces in GDP with an average gain of 8 percent, sending the stock market to a 50 percent rally in early 1930 as investors thought the worst had passed.
"False premise," Rosenberg said. "And guess what? We may well be reliving history here. If you're keeping score, we have recorded four quarterly advances in real GDP, and the average is only 3%."
Rosenberg's warning comes as a slew of major analysts-Goldman Sachs and JPMorgan among them-have slashed GDP projections for 2010 to the 1.5 to 2 percent range.
Chicago Federal Reserve President Charles Evans said in a speech Tuesday that the risk of a double-dip recession has escalated. He said government programs to help distressed homeowners have been ineffective and aren't helping the pivotal housing sector recover.
The dour outlooks come on the same day that the National Association of Realtors said home sales reached a 15-year low in June, dousing hopes that the industry had reached a bottoming point.
Rosenberg points out that the "overall economic malaise" has come despite aggressive efforts by the Federal Reserve to stimulate the economy through rate cuts. The central bank itself has scaled back its economic projections, has held steady on its balance sheet, and could be announcing another round of quantitative easing measures at its Jackson Hole summit this week.
"How's that for a reality check," Rosenberg said. "It's not too late, by the way, to shift course if you have stayed long this market."
1) Developers filed plans today in NYC to develop the City's tallest skyscraper. 2) You can't get into a top NYC restaurant without making reservations weeks in advance. 3) Two charity events on Nantucket, the Boston Pops concert and a golf tournament to benefit the Island's children, just raised record amounts of donations. This ain't a depression by a long shot.
My favorite Wall St. economist when I was coming of age in the 1980's was Ed Hymann (now of ISI Group, then of CJ Lawrence). Ed would produce a weekly research piece which consisted of newspaper and chart clippings of anecdotal happenings that pointed to the direction of the economy.
Turn off CNBC and just look around...things may not be "as good" as they were during the fluff-induced Clinton/Bush years that y'all grew up on, but they're not all that bad either.
I don't beleive what he wrote about being in a depression. My mom lived thru the depression and there is no comparison - 25 to 30% unemployment, people had nothing and stood in line for sugar & flour to make their food. I don't see how he can say seriously that we are in a depression with sold out concerts and baseball games and football games with $100/seat tickets, $25 parking and $10 beers. In a depression no one shows up for these events because most can't afford it and the ones that can are too scared to spend it.
HUN is a better bet if you're really long and ready to park some dough for a while without peeking at it daily. But keep watching and you'll buy it better once you see how the news cycle affects it in the coming week(s). HUN suffers more from bad econ news then others in the sector but that may be normalizing a bit. DOW was the bigger loser today but that's not saying much. It's all pretty bleak short term. There's no hurry IMHO to jump in now and certainly not all at once.
You can do better if you're looking for good divi.
The short of it (not in order of importance)
1). mucho cash, ain't going out of business
2). sunspots are at an all time low (sorry, inside joke)
3). divvy, dime/share/qtr
4). mgmt wants to sell.
5). mgmt wants to sell at a good price
6). did I mention mgmt might sell?
Note: you may wait as long as 2 years for it to happen and suffer a PAPER loss at times. But if you can wait that out, you'll be good.
Sure, there are two reasons.
First becsude of corporate actions unrelated to operating performance (all of which which have been favorably resolved), HUN trades at a discount.
Second, HUN will be sold once the economy recovers and its EBITDA normalizes. In the context of that sale you will be paid a control premium above and beyond the market valuation of the shares. DOW is not going to be sold.