Devastation? . . .
Classic Portfolio Components
Losses for the Week (%)
100 Stocks--3 Portfolios
October 10, 2008
|
Alcoa |
-41.5 |
|
Exxon |
-20.0 |
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MMM |
-16.0 |
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AmerExpr |
-25.0 |
|
GenlElect |
-0.3 |
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MorganStanley |
-59.5 |
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AMR Corp |
-13.4 |
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GenlMotrs |
-45.7 |
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Pfizer |
-20.3 |
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BankAmerica |
-39.5 |
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HewlPack |
-14.0 |
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ProctGamble |
-16.1 |
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Boeing |
-22.3 |
|
HomeDepot |
-17.1 |
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Schlumber |
-16.6 |
|
BristolMyer |
-14.0 |
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Honeywell |
-19.1 |
|
UnitdTech |
-13.2 |
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Caterpllr |
-15.8 |
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IBM |
-15.2 |
|
VerizonComm |
-14.3 |
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Chevron |
-27.1 |
|
IntlPaper |
-23.6 |
|
Wal-Mart |
-14.7 |
|
Citigroup |
-23.1 |
|
JNJ |
-15.6 |
|
DJ30 dia |
-18.8 |
|
CocaCola |
-21.1 |
|
JPMorgChase |
-9.3 |
|
NA100 qqq |
-13.4 |
|
Disney |
-22.0 |
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McDonalds |
-11.4 |
|
SP500 spy |
-19.8 |
|
DuPont |
-13.9 |
|
Merck |
-17.5 |
|
Intrnet hhh |
-18.1 |
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Portfolios |
avg |
max |
|
|
|
|
|
CLASSIC |
-20.2 |
-59.5 |
|
|
|
|
|
PARADIGM |
-15.8 |
-34.2 |
|
|
|
|
|
INTERNET |
-13.0 |
-32.0 |
|
|
. . . not if you are short. All these numbers get flipped to the positive side. Visualize plus signs. They become profits. How many subscribers make use of short sales? More on that in a moment.
There is much information here. First, government problem solutions are making no progess. Note that Bank of America and Morgan Stanley have just undergone devastating declines this week, agonizing their shareholders. (Recall that Morgan Stanley is a commercial bank now, supposedly giving it the same kind of access to federal help that BOA and other U.S. banks are presumed to enjoy.) The magnitude of these declines suggests the going-out-of-business fire sales that have continually preceded other financial company failures which started last year. We shall see.
Second, The accelerating drop in the General Motors stock this week suggests the same conclusion.
It is the acceleration that is the tipoff. To be sure, the 95% decline in the market value of the company's shares since their high in April 2000 suggests terminal pathology. The vultures smell the smell that death emanates announcing its advent. Its acceleration emphasizes the prospect.
Third, if acceleration is a symptom, is Bank of America immune? One hope is that this week's longside devastation marks the climactic end to the whole, sordid, worldwide affair. One of these declines will mark that day. But not this one, I am afraid. 1929-1932 ended with a whisper, 63,000 shares traded on July 8th, 1932, shrunk from the half-million shares traded the day of the crash three years before. 1987 ended seven weeks after devastation day with 70% less volume than that of the panic day itself. I think this time we are witnessing a rolling panic, much like1929-32. The next cascade may be a Halloween-day surprise--perhaps a sayonara BOA, or the first trading day thereafter . . . just in time for the national election polls to open.
Fourth, the small summary table of portfolios below the big table of 'blue-chip' stocks tells a different tale: one of optimism. The Paradigm 2000 Portfolio, as you know, comprises the best growth stocks. The Internet Set Portfolio holds the best internet stocks. Both these groups are superb growth engines, as distinct from value holdings. They sniff the wind before it turns. They give the jump before the big tops and bottoms. They discount bad or good times ahead, before the Classics do. Note in the little table how they are doing measurably better than the blue chips. This is typical of bear-market bottoms--no precision, but the mood is shifting. Avoid trading the shift, but prepare to trade the testing of it--which means a price rally, followed by a decline which does not exceed the previous low price followed by the next price rise that exceeds the previous one.
Short selling. We did a poll recently asking you to vote for more risk for bigger profits vs lower profits in exchange for less risk. About 25% of subscribers participated. I guess that's OK. I have no experience in these matters. The results were 85% in favor of bigger profits, accepting greater risk vs 15% in favor of lower profits with less risk. Here's another one. Completely factual, no judgement required, you either do it, or you don't.
Do you personally sell short? Yes or no. That includes using (buying) derivatives (inverse ETFs or funds or put options) which give you the effect of being short. Simply type yes or no in the subject line of an email to me at this
address. That's all there is to it. I'll let you know the count and will discuss the results of the previous poll in more detail as well. Many thanks.
Notes and Caveats
One anecdotal week like the one we have just endured, or taken advantage of, depending on your posture during its passage, does not carry sufficient significance to attach heartfelt meaning to. But this one does transport itself well within the unfolding market context exemplified in the recent study which we did here.
Posted
10/12/2008 6:07 p.m. EDT
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