Leaving for Art show so perhaps limited Update on Thursday and no Update on Friday.

VP Debate

Obviously the two Katie Couric interviews were a disaster. However, Palin is a good debater (previous performances in Alaska were quite good) and should not be underestimated. She has avoided the mainstream press and has basically prepared for 30 days for this debate. Low expectations help her.

Biden is skilled but a gaff machine. He has to be very careful not coming off as erratic and condescending as John McCain did in first debate and on the campaign trail. He should focus on McCain’s record not Palin. Every poll out there has Obama winning first debate.

Markets

Markets basically flat yesterday. No new technical trends

Question If bailout passes congress will the bull market be back? – NO (reading the tea leaves)

There will still be a recession and the rescue/bailout plan could be just the first inning of a nine inning game. It’s going to take time to fix things. Technically as stated yesterday, the last 4 times the VIX (measures fear/volatility in markets) reached the levels it did the S&P was up 7 to 15% in a month. Earnings season starts in a week or two and it isn’t going to be pretty.

Here’s Tom Friedman’s editorial "Rescue the Rescue " LINK

Fundamentals are just lousy and growth in BRIC countries is slowing. These rapidly expanding emerging markets were what was dragging all other countries higher. There is also the obvious long term problem the US has because it is addicted to oil. Lots depends on how fast we can change to non oil based energy sources and are we going to be spending the next decades fighting more and more wars.

More later when there is more time. Off to art show.

Long Term Outlook – Bearish

Technicals – The VIX gives a clear buy signal.
Fundamentals – financial mortgage transparency problem is far far far far far far far far far bigger than anyone thought. But there is hope in a bailout plan, especially one that has broad support. The current plan has been poorly presented and does not have enough support

(Caution – this “Outlook” is based on US equities and while US markets greatly influence other markets it is not necessarily the outlook for recommended sectors.)

People feel like we are in a recession. The actual strict definition – 2 quarters of negative GDP growth has not occurred. How bad the recession will be is be is the major question.

Asset Allocation/Recommended Sectors (long term)

* 85% to 100% Cash

* 10% US Index Funds
UWM (2x what Russell 2000 does) & QLD (2X what the NASDQ does) Generally – Really Big Banks Look good

*5% Emerging Markets
EWZ (Brazil) should out perform other emerging markets

Chief Strategy – Buy the dips of trending sector Traders who have a strong tolerance for risk and belief that the bailout will pass both branches of congress to jump in on dips. Long term Investors who can tolerate very very high risk and are 100% in cash could nibble.
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As Always Do Your Own Research Before Investing

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