Ignoring Bad News
Research for Online Investors

by John Dalt

8/24/09

The market wants to go higher as we have been up five out of the last six weeks. There is talk now that September will deliver the bad news with a market fall. I don’t know. We should not discount the possibility of a pullback, even the likelihood. No market goes up forever. We have been on a great run since the low on March 6. Trying to stay neutral, and not be biased for the bulls or bears is tough. It takes conviction to risk money on an investment or trade.

Conviction requires we are “convinced” it is the correct move. The test is to be convinced, without being blinded to new evidence that confronts us. Let’s all be a little less convinced and a little more nimble. I will do my best to give you my take on the market, and try to keep the bias out of the observations.

Right now....today, I still feel the market is ignoring bad news.  Investor’s rose-colored glasses do not see the weakness that underlies our economy, or the burgeoning national debt that will threaten any future recovery.  When the market ignores bad news, greed takes over.  Greed overcomes the fear of losing money.  Greed tells us to “get in the market” so we can make money like everyone else.

The best we can do now is to stay invested, but be wary of reversals that can damage our long-term goals.  We will watch for the “sentiment” of the market to change.  That will occur when “good news” is discounted and the market does not react favorably.  When sellers ignore good news, the “worm has turned.”

The FDIC closed four banks over the weekend.  That brings the total this year to 81.  For the first time, the FDIC sold assets of a U.S. bank to a foreign bank.  The FDIC turned over Guaranty Financial of Texas to Banco Bilbao Vizcaya Argentaria of Spain.  BBVA is now the fourth largest bank in Texas.  Wow, I wonder what our friends in the Lone Star State think.

We have added a Global Economic Calendar to the “Investor Resources” page. It’s a quick place to look and see what report or information is coming out that may affect your holdings.

A new subscriber, D.P. directed me to the Heartland Institute over the weekend. I spent some time reading on their website. Their mission “is to discover, develop, and promote free-market solutions to social and economic problems. Such solutions include parental choice in education, choice and personal responsibility in health care, market-based approaches to environmental protection, privatization of public services, and deregulation in areas where property rights and markets do a better job than government bureaucracies.” You can spend time in a worse place. Visit Heartland Institute. Any website that has Milton Freidman’s picture on the home page can’t be all bad.

Subscriber C.F. sent a note about Vibram “barefoot shoes. C.F. thought they “might be the next Crocs.” I went on a search thinking we might find a hot stock to recommend to our readers. It looks to be a private U.S. company, operating under a license from an Italian company. Check out the next fad at http://www.vibramfivefingers.com/

The President is on vacation in Martha's Vineyard, in a $35,000 per week villa.  How is that "change" workin' out for you?  Paul Krugman opines in the New York Times that Reaganism should be Dead.  Time to run my favorite picture.

So I said to him, "Barak, I know Abe Lincoln, and you ain't him."

Keep ideas coming, I like to hear from you.  I am always pleasantly surprised by discoveries or observations from our readers.  Send me your comments at  john@galtstock.com

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.

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