And it worked - except, in their case, it didn’t prevent a recession and rising unemployment (something we're worried about for the US in 2009). In the long-term, there plainly were benefits, but it took 5 years before the entire situation resolved itself.
With this as an example, my firm has supported the hastily conceived $700 billion “buyout plan,” even though we have opposed most of the government’s previous rescue maneuvers. And that, friends, is the long and short of it. Either the plan is adopted, and the markets give us the anticipated “add-on” rally, or the plan is defeated, and we're right back in the abyss. I urge you not to overthink the situation.
The call for this week: This morning, we have the recondite rescue bill on the table, yet it's anything but transparent, creating worries that it may not pass. And that has the preopening futures sharply lower.
Nevertheless, 2 weeks ago today, my firm suggested another tradable “low” was being made (the fourth of the year) and suggested trading types scale-buy into weakness using the indexes of their choice (ETFs). I also stated that more conservative types should probably wait for a session that exhibited positive closing action on the assumption that would lead to a skein of better days ahead.
A week ago today, I said, “The lows are ‘in’ for the year” (a statement that will be tested today); to which I now add, “Provided the pandering politicians pass the ‘buyout’ plan.” Accordingly, trading accounts should be “long” half of their index positions, having sold the other half into September 19th’s 400-point Dow Wow on the premise the politicos don’t have a clue as to how to fix the problem. Still, as we enter the fourth quarter, participants should keep in mind that the S&P 500 has produced positive returns in the final quarter of the year 77% of the time since 1960; and technology has tended to be the best performer.
Also worth considering is that the only sector with positive net earnings estimate revisions during the past month has been Telecom Services. Additionally, my firm has “warmed” to stuff-stocks again (particularly the oversold energy complex) now that the Olympics/ Paralympics are over and China’s factories are back “on line.”
Speaking of China, the Shanghai Composite Index’s plunge has left the average price/earnings ratio of listed Chinese firms at roughly 17 times historic earnings, making China again look interesting. Ditto a number of other international markets look attractive, but not so for Europe.
Looking ahead to themes for the next 10 years, my firm continues to embrace agriculture (farming/forestry), water (water rights, water treatment, etc.), new technologies playing to energy conservation (including alternative energy and nuclear); as well as climate change, including environmental pollution and resource limitation.
Meanwhile, our political leaders continue to pander to a mis- or under-informed electorate while failing to address the nation’s real issues. For example, the top 1% of wage-earners pay nearly 29% of the nation’s total taxes, while the top 5% of wage-earners pay some 48% of the total tab. This fact seems lost amid the current political blustering; or, as Oscar Wilde noted, “The public has an insatiable curiosity to know everything except what is worth knowing.”
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