01/04 Kelly Letter Topics
Weekly market review
Seasonal rally
Abysmal manufacturing
Horrific housing starts
Crumbling consumer conf
Rising oil price
Obama's cabinet
Is the Fed a failure?
Platinum 5-star stocks
Market forecast on track
Oil price trends
When to short Treasuries
Mark Hulbert wrote last week that the best market timers in his database are bullish, while the worst ones are not.
Steve Sjuggerud wrote:
U.S. real estate is no longer a bubble. It's affordable once again. The median family can afford the median home in most of America. Sure, we have an oversupply of homes for sale. It happens in recessions. That'll work itself out. No big thing. (Really!) And sure, it will likely take many years for the market to stabilize, much less recover. But the bubble is gone.
The forward price-to-earnings ratio for the Dow Jones Industrial Average is about 12. By that standard measure of value, stocks are the cheapest they've been in a quarter century... That's hardly a stock market bubble!
Meanwhile, people are downright fearful. Instead of being scared, you should think about buying. Stocks are 1) cheap and 2) hated. We're just missing 3) our uptrend... Then, it's time to buy!
That part about a missing uptrend is worth noting, especially this morning.
You may recall the market's performance last Monday: The Dow lost 7%, the S&P 500 8.8%, and the Nasdaq 9.1%. It was the S&P 500's worst day since the 1987 crash.
The bailout bill passed on Friday, though, so all was supposed to be well. It wasn't. The relief rally from that lasted all of three minutes before rolling over and ending the day down again.
Last night, here's how the rest of the world fared:
-4.3% Japan -2.6% London (9:00 a.m. Eastern) -4.7% Germany (9:00 a.m. Eastern)
The U.S. is set to open lower following those acknowledgments that a $700 billion bailout plan that replaces the worst assets in banks with lendable cash still can't make banks lend. More is yet needed, and a fine step according to traders would be another interest rate cut.
I always like to point out opportunities where they exist, and it's awfully easy to see the one staring us in the face right now. Real estate prices are down at the same time that interest rates are down. You can fairly often get one or the other, but rarely do you get both.
Consider spending time away from the stock market to get some money together for a down payment (remember those?) on something that's become a great value. Experts disagree on whether real estate has bottomed and it varies by region anyway, but now is a good time to become that fabled "prepared man" who's favored by chance.
