Yes, the trend is always your friend my fellow investors, but it can also be your enemy. Knowing when the trend has turned into some sort of market bubble will help you prevent huge losses to your portfolio and other financial assets. The two industries in focus right now are the financial and the oil and gas indutry. Which group is a potential bubble, a bubble about to burst, or a bubble that has already burst is the million dollar question of the day.
In previous articles, I spoke of building a long-term bank portfolio because I believed that many bank and financial stocks were beaten down sufficiently enough to take another look at the sector. We started with BBT Corporation (BBT:$32.73), iShares Trust- Dow Jones US Fin Sec (IYF: $81.70) and JP Morgan (JPM: $42.32). Our fledgling bank portfolio of three stocks was up by 3.01% as of 5/11/2008 but is now down over the last trading week of 5/19/2008 by about -2.64%.
Do we continue building our bank portfolio or do we take a pause? Is the trend down or up for bank and financial stocks? Well, we know for sure that the last market bubble- the Sub-Prime Mortgage Crisis of '07 which caused the current credit crunch is not over. The Feds are still committed to keeping the markets liquid by increasing the money supply, while internationally, the president of the European Central Bank, Jean-Claude Trichet recently said that the, "potential economic fallout from the turmoil in financial markets, coupled with pressures from rising food and commodity prices, add up to an accumulation of shocks that is clearly not over."
Are US markets experiencing a quick bounce before an extended period of decline, or has the Feds taken enough steps to avoid a deep and serious recession that could be followed by a nasty economic depression? If it's the latter, then no matter how good I am at stock picking, we are all going to lose a lot of money. If its the former- Feds have done enough to avoid a recession- then our stocks and other investments may have a chance within the next 12 to 24 mos.
Is the trend for financial stocks signaling a serious and prolonged downturn? I believe that financial stocks are in for a serious decline- I do not know by how much- you will see a wave of consolidation, the likes of what occured during the Savings and Loans crisis of 1980s and 1990s. However, if you do decide to continue to build a financial and bank stock portfolio, choosing well capitalized bank stocks may be the best way to weather the coming storm ahead.
Finally, is there a bubble or one developing in oil and gas industry or stocks? Based on my constant research and market chatter, I do believe that there is one. However, there are many fundamental economic, political and structural factors which have been greatly magnified as crude runs higher.
Don't miss my next posting featuring another oil and gas stock that has posted double digit returns over the last 2 years. We are confident that our next posting will add some flavor and money to your portfolio! Our last oil and gas recommendation was Mirant Corp (MIR: $40.69) recommended at $36. See 2/17/2007 post.
The editorial content on this site is prepared for us by UCS Investment Co. as a service to our clients. You should seek professional advice before implementing any of the strategies discussed herein, since: (1) The strategies are general in nature and will not apply to every situation; (2) Other opportunities may be better suited to your particular needs; and (3) The rules and regulations are constantly changing.
In previous articles, I spoke of building a long-term bank portfolio because I believed that many bank and financial stocks were beaten down sufficiently enough to take another look at the sector. We started with BBT Corporation (BBT:$32.73), iShares Trust- Dow Jones US Fin Sec (IYF: $81.70) and JP Morgan (JPM: $42.32). Our fledgling bank portfolio of three stocks was up by 3.01% as of 5/11/2008 but is now down over the last trading week of 5/19/2008 by about -2.64%.
Do we continue building our bank portfolio or do we take a pause? Is the trend down or up for bank and financial stocks? Well, we know for sure that the last market bubble- the Sub-Prime Mortgage Crisis of '07 which caused the current credit crunch is not over. The Feds are still committed to keeping the markets liquid by increasing the money supply, while internationally, the president of the European Central Bank, Jean-Claude Trichet recently said that the, "potential economic fallout from the turmoil in financial markets, coupled with pressures from rising food and commodity prices, add up to an accumulation of shocks that is clearly not over."
Are US markets experiencing a quick bounce before an extended period of decline, or has the Feds taken enough steps to avoid a deep and serious recession that could be followed by a nasty economic depression? If it's the latter, then no matter how good I am at stock picking, we are all going to lose a lot of money. If its the former- Feds have done enough to avoid a recession- then our stocks and other investments may have a chance within the next 12 to 24 mos.
Is the trend for financial stocks signaling a serious and prolonged downturn? I believe that financial stocks are in for a serious decline- I do not know by how much- you will see a wave of consolidation, the likes of what occured during the Savings and Loans crisis of 1980s and 1990s. However, if you do decide to continue to build a financial and bank stock portfolio, choosing well capitalized bank stocks may be the best way to weather the coming storm ahead.
Finally, is there a bubble or one developing in oil and gas industry or stocks? Based on my constant research and market chatter, I do believe that there is one. However, there are many fundamental economic, political and structural factors which have been greatly magnified as crude runs higher.
Don't miss my next posting featuring another oil and gas stock that has posted double digit returns over the last 2 years. We are confident that our next posting will add some flavor and money to your portfolio! Our last oil and gas recommendation was Mirant Corp (MIR: $40.69) recommended at $36. See 2/17/2007 post.
The editorial content on this site is prepared for us by UCS Investment Co. as a service to our clients. You should seek professional advice before implementing any of the strategies discussed herein, since: (1) The strategies are general in nature and will not apply to every situation; (2) Other opportunities may be better suited to your particular needs; and (3) The rules and regulations are constantly changing.
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