Sunday, February 3, 2008

Phil Says: "Six More Weeks of Winter!"

When I was a kid, I always wondered if a groundhog could really predict the seasons. As an investor, I think about 'ole Punxsutawney Phil in a while different light. Think about the economy surrounding that groundhog. Think about the hundreds of people who pour into that Pennsylvania town each year, the thousands who buy memorabilia, and the millions who tune in to the shows that carry the scoop on what Phil had to say this year. Those millions see advertisements which keep the shows on the air. Those advertisements inform people about products that they then buy. Amazing!

Winter may only be six weeks longer, but I predict that the market's volatility will go on a lot longer than that. What's happening in the market right now is something of a "mini-rally". This is the perfect opportunity to sell shares of any stocks you own that make it into the green. This rally will not continue indefinitely!

Sometime within the next 4 quarters (6-12) months, there will be some great bargains to be had. If you want to learn about the great bargains of the last few weeks, look no further than financials. The market has rebounded about 8% from it's low. Here's what some big financials have done:

Bank of America (BAC): up 36% from low on 1/22/08

Capital One Financial (COF): up 52% from low on 1/22/08

Washington Mutual (WM): up 103% from low on 1/9/08

Etrade Financial Corporation (ETFC): up 139% from low on 1/8/08

Man, I sure wish I knew that those stocks had hit rock bottom! My portfolio would be up a whopping 83% in 3 weeks!

Here's the good news: these stocks still have not hit rock bottom, and you will have the opportunity to see even bigger profits! These corporations are rising on speculation. The speculation is that the housing market has hit already hit bottom, most loan defaults have already been realized, all loan insurers are financially sound, and that the Fed's rate cuts will provide adequate liquidity. None of these assumptions are true! Conditions resulting from the sub-prime mortage mess and volatility in the great market will hamper financial stocks one again, and it will get worse before these stocks can maintain their gains. Stay tuned!

In view: Last time, I recommended Ultrashort Dow30 ProShares (DXD) as a short term buy. On Friday, if you bought DXD at around 10:00 AM (ET) you would have paid about $53.90 per share. Just an hour later, around 11:00 AM (ET), you could have sold your stake at around $55.60 per share, a 3.15% premium! CD's take almost a year to reach that return rate, and you could have made that in an hour! Personally, I am still waiting for the Dow to reach 13,000 before purchasing Ultrashort Dow30ProShares as a long-term investment strategy for a bear market. That said, there is money to be made every day!

Dollar Bill did not own any shares in any of the stocks he's mentioned at the time of publication.

1 comment:

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