Beating out a Bottom
Research for Online Traders

by John Dalt

02/03/09

The market continues to beat out a bottom.  There is fear of a fall, while we wait for the next pronouncement from Capitol Hill.  Earnings and expectations for the future are depressing prices as the market tries to understand the economic realities going forward.

Over the last six months, money is taken out of the market and price/earning ratios tightened as stock prices declined.  Now with reduced earnings the smaller price to earnings ratios dictate even a lower stock price.  This seems to be the quandary we are caught in during earning season.  The market has repriced to lower price/earnings ratios and now with lower earnings, we are trying to fight off lower stock prices.

John Paulson’s firm Paulson and Company manages nearly $29 billion in their hedge funds.  Last year they made from 12.55% to 37.6% on different funds they manage!  The New York Times reported yesterday that they made a big bet on the Anheuser-Busch buyout and at closing was the largest single shareholder of BUD stock.  This was one of the plays we made in the Swing Trade Service last fall.  I did not buy and hold it through the takeover.  We bought and sold it three different times for 8 to 10 percent profits each time.    You can read the article here.

The Senate has added over $60 billion to the ‘stimulus’ bill that the house passed.  The tug-of-war on the capital continues.  Tom Daschle withdrew his name for secretary of health and human services.    This weekend it was revealed he had failed to pay over $100 thousand dollars in taxes on a limo that was provided to him.  There was also a matter of speaking fees that he forgot to report and pay taxes on. You can read the Wall Street Journal article here.

January auto sales plunged to a 27-year low.   Chrysler and GM are offering buyouts to employees.  If you leave, they will give you cash and a car!

• Chrysler -- 55%  
• GM    -------49% 
• Ford    ----- 40% 
• Toyota --- 34%  
• Nissan ---  30% 
• Honda----- 28%  

Even with a boost from the anticipated federal stimulus plan, we see consumers taking a cautious approach to large ticket discretionary purchases," S&P equity analyst Efraim Levy said in a note for clients

You can read the whole story here.

I have sat on the sidelines, waiting for the market to jump or dive.    I am convinced we have to have clarity to the banking crises before the market can gain footing.  I have established bullish positions on financials with this in mind.

I hope this letter gets to you in a timely matter.  Yesterday’s letter has been lost in email hell.  I have sent it twice and filed a concern with the email servicing company that we use.  They are working to find the problem.  You can read yesterday’s letter here .

Quote sent by a reader:
"You cannot legislate the poor into freedom by legislating the wealthy out of freedom. What one person receives without working for, another person must work for without receiving. The government cannot give to anybody anything that the government does not first take from somebody else. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that my dear friend, is about the end of any nation. You cannot multiply wealth by dividing it"

  The late Dr. Adrian Rogers, 1931 to 2005

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

HOME

Back to Top