This week represents the calm before the storm. One last little breath of good news before we all settle in for another nightmare in our financial markets.
The Dow is sitting at about 9800 right now...it may rally to 10,000 this week, maybe not...but it's not the time for nickel and diming the market. This is a warning, get out of anything risky this week, it will probably be your last chance for quite a while to do so.
Behind the scenes right now, the real panic is starting. Small and medium sized banks are scrambling to unload a ton of commercial real estate, and they're finding no buyers to hold on to overbuilt strip malls and liquor stores. It's essentially the same situation we had last year...when everyone wants to sell a particular asset at the same time, that asset becomes valueless.
I may do a post about the mark-to-market and the effect on a bank's balance sheet, but that's a discussion for another time. In short, it's a new form of accounting that banks must do...and it's going to cause a whole lot of banks to fail.
It's going to start a chain reaction, which will hurt the markets, especially the stocks.
So...if you have your 401k in a lot of growth funds...it might be time to start trading those in for some bonds or money markets.
When I say it might be time...it is time...the time is now. Get on it, don't say I didn't warn you.
I'm not calling the top yet, but I am saying that it will happen before this week is over.
Monday, September 28, 2009
Tuesday, September 8, 2009
Get out of the banking sector this week
The first shoe to fall in our annual autumn crash will be the banking sector. It started the fun last year, and I have every reason to believe that it will be the same this year.
No one is talking about commercial real estate now, but by year's end it will be part of the conversation. The commercial market is almost as overextended as the housing sector...ie there's too many malls, strip malls, and drug stores to support the demand for these things. That means empty commerical buildings (seen any in your neighborhood?) which means that the banks may not be getting their loans paid on these buildings.
These things add up slowly, but then hit you in the face all at once. The real pain for businesses didn't come until late last year, and it came suddenly when everyone panicked and stopped spending their money. Now it's been a year, and those Bennigan's and Steve and Barry's closures are beginning to hit banks, and the worst spot to hit them is in their capital.
Many many banks are struggling with this, but mostly local and at most reigonal banks. The big banks haven't been lending to businesses for a while.
This will either incite the stock market fall through a rash of bank failures, but more likely Obama will be act. I'm betting that it will be a creation of bad banks the government will start. Basically, it will start buying up commercial real estate paper (buy their mortgage) and collecting them in big government owned banks. Their mission will be to split these assets up and start selling the best, slowly selling the rest once the market improves and eventually closing the banks with a zero on the dotted line.
Regardless of the actual damage done this fall...the drop in the market will occur for 2 reasons.
1) The economy is not as healthy as it would appear. We still have some pretty bad problems.
and
2) Because everyone will suddenly realize that #1 is a reality, and will be racing to sell.
It is going to occur in 2009, and the smart ones who sell out soon will be ready to scoop up the same stocks for 25% less than their sale value today.
Predict the market, don't be the fool that reacts too late. Sell your financial stocks today.
No one is talking about commercial real estate now, but by year's end it will be part of the conversation. The commercial market is almost as overextended as the housing sector...ie there's too many malls, strip malls, and drug stores to support the demand for these things. That means empty commerical buildings (seen any in your neighborhood?) which means that the banks may not be getting their loans paid on these buildings.
These things add up slowly, but then hit you in the face all at once. The real pain for businesses didn't come until late last year, and it came suddenly when everyone panicked and stopped spending their money. Now it's been a year, and those Bennigan's and Steve and Barry's closures are beginning to hit banks, and the worst spot to hit them is in their capital.
Many many banks are struggling with this, but mostly local and at most reigonal banks. The big banks haven't been lending to businesses for a while.
This will either incite the stock market fall through a rash of bank failures, but more likely Obama will be act. I'm betting that it will be a creation of bad banks the government will start. Basically, it will start buying up commercial real estate paper (buy their mortgage) and collecting them in big government owned banks. Their mission will be to split these assets up and start selling the best, slowly selling the rest once the market improves and eventually closing the banks with a zero on the dotted line.
Regardless of the actual damage done this fall...the drop in the market will occur for 2 reasons.
1) The economy is not as healthy as it would appear. We still have some pretty bad problems.
and
2) Because everyone will suddenly realize that #1 is a reality, and will be racing to sell.
It is going to occur in 2009, and the smart ones who sell out soon will be ready to scoop up the same stocks for 25% less than their sale value today.
Predict the market, don't be the fool that reacts too late. Sell your financial stocks today.
Tuesday, September 1, 2009
Not yet...
Today was a rough day...markets tanked a little bit...but this isn't it quite yet. We still have some more to climb before we start our long decent. They're right today...the markets have climbed too far without any huge fundamentals supporting it.
The tanking we saw today was most of the smart money coming back from vacation...most traders take August off and don't return until the 1st of September. They got back to their desks and were happy to see the climb had continued, but bailed because they knew it won't last.
It won't last much longer, we're going to see a tank pretty soon...but my bet is that we have a few more weeks to go.
Pay close attention to financials...they are going to lead the fall. Also, keep an eye on Friday bank failures...you're probably going to get a slew of them just before the market tank happens.
Probably a good time to start backing out of your most overpriced pieces of your portfolio. Get out of bank stocks by the end of next week for sure.
Today was bad, but we'll make up this ground by the end of the week.
Wait for it...
The tanking we saw today was most of the smart money coming back from vacation...most traders take August off and don't return until the 1st of September. They got back to their desks and were happy to see the climb had continued, but bailed because they knew it won't last.
It won't last much longer, we're going to see a tank pretty soon...but my bet is that we have a few more weeks to go.
Pay close attention to financials...they are going to lead the fall. Also, keep an eye on Friday bank failures...you're probably going to get a slew of them just before the market tank happens.
Probably a good time to start backing out of your most overpriced pieces of your portfolio. Get out of bank stocks by the end of next week for sure.
Today was bad, but we'll make up this ground by the end of the week.
Wait for it...
Subscribe to:
Posts (Atom)