With all the leverage that has been put on by so many, and the stress of people rethinking their risks, I suspect some "accident" is reasonably likely - the kind of accident that can produce a 5%+ down day. And even if it is more orderly, I would expect another 5% to 10% giveback if the economy weakens further, but prices and rates do not.
So I'll stay relatively cash and defensive large cap blue chip heavy. Added a little JTP and PFE.
hello bdparts, although i don't know TA, i figure some reversion is due here. The selloff in both PFE and JNJ relative to the broader market and even within pharma has been surprising. Given JNJ's broad consumer exposure, esp. after acquiring PFE's consumer biz, I think a fair case can be made that it should trade closer to the multiples of some consumer staple names like CL, etc. And more broadly, the discount in large blue chips vs. small risky names appears to me even more unjustified given the increased volatility of late. While I am not sure about a resumption of the bull posited in this article, I do think large defensive blue chip is the way to go given that relative discount: http://www.investorvillage.com/smbd.asp?mb=4143&mn=19688&pt=msg&mid=1587377
Thank you all for sharing your thoughts. I can't speak against such prudancy that's been expressed here. I fully expect that worse things are to come in banking industry. But, very near term, I am looking into trading opportunities near--but not at-- subprime area.
As to the official comments, I don't buy them wholesale, but some data give a proportion to the current problems. As I expected, the one year old subprime loans got into trouble. I think the softening of RE market was the culprit. In this sense, any lenders that loosened standard are to have problem. I only need to look at last year's "loan production gains" to know who to avoid. I don't have much time this next couple of weeks, but I'll see what I can find.
Best regards, Sam
PS did anyone read the Berkshire letters? It's a joy, bar none.
I wonder how many holding companies that were/are invested in subprimes have major interests in collection agencies? I think this goes deeper than anyone realizes and sitting on the sidelines in anything financial might be prudent. I have a position in GE and I am thinking it may be a good time to pay the taxman.
you may well be right.. I have said since about Nov. that the market feels like a game of chicken..maybe I'm like the stopped clock here..but IMHO....the markets were looking for a sell off,and Greenspan and China gave them the excuse they needed.The real reasons for the sell-off IMHO were the fears of where the US housing market might go,the concommitant effect on consumer spending etc , despite the realtors/banks, mortgage co's, talking their book,since last year.The Wall of Worry just got to be too much, but nobody wanted to be seen to break ranks...