The August durable goods orders surprised to the upside, up 3.3% over July, with expectations of only 0.8%. So, the economy is giving mixed signals and we need to be able to decide what it all means. We do that by looking at prices of stocks.
With that in mind, let’s take a look at one of our friends, Fannie Mae, FNM. We know it’s a little self serving to the bears but we mentioned last week (in Thursday’s post) that FNM and WMT had not gotten much press on the prices of their stocks making multi-year lows. Well, today FNM did make the news as its stock plunged over 10% after more news about its accounting came to light.
The real stock prices are measured in the averages that we watch and the Dow Industrials have now posted three up days in a row, even though the total move in those three days is only 53.50 points. We had talked about the positioning for a bounce as we headed into the end of the quarter and that the market had gotten a bit oversold. Well, tonight the market has now released some of the oversold position and the little rally, or non-rally, we have had has given us a much better neutral situation.
We are probably going to be sorry about this decision but we have put off our new positions until next week assuming that the market will find some way of closing stronger into the end of the quarter.
Meanwhile, the Japanese market has quietly moved higher since the lows of May. As measured by the Nikkei 225, that market is up about 20% in that period. We had hoped to catch a little ride on the foreign markets after the Dow Industrials dropped so we will keep our eye on this market for sure. The Nikkei 225 is trading near 13,500 after bottoming out just under 8,000 in 2003. We want to remind you that this market traded near 40,000 back in 1989. We think the Japanese market is the key foreign market to watch. The European markets are ok also but the Japanese market has shown some good strength after over a decade of declining prices.
Dow Industrials: 10,473.09 +16.88
BGEIX: 13.27
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2 comments:
Glenn,
Really enjoying the posts. Keep them coming.
Unfortunately or fortunately, as I read, ideas about the future start popping in. After reading the post from today, I'm wondering if one could plan on riding a downswing in the US markets and then catch the Nikkei on an upswing. Or do both at the same time. I know we have discussed the Japanese economic situation in the past in an attempt to discover clues to the direction of our own. I guess I wonder if they have languished enough and are preparing for a substantial rally. Have they fixed their problems enough to warrant a position?
Apple butter is on Oct 22nd if you are interested. Pam and Jason are welcome.
Erick
Erick
Your thought is exactly the one I am having. I just didn't think Japan would take off so soon without us. The big concern I continue to have is that if the US economy slumps near term which seems fairly likely given the current situation, then Japan should feel it, too. In terms of our work, I do like to see a nice run up like Japan is doing and then follow that up with a little correction when our market tumbles here over the next month or so. The key support levels would/should hold and then would be an ideal time to get into Japan. The best way I can think of getting into that market is using the ETF route which would be the EWJ.
Of course, there is the diversification plan. I don't subscribe to this plan very much because I think you can move your assets to better places. But, the diversification plan does suggest that you put your money in different places at the same time to avoid a problem. It seems that putting your money into two different mutual funds that invest in the same stocks is not really diversifying but putting some in the US and some in Japan is. Like I said, I think both markets will drop together but the Japanese market will go up after that. The US might have that infamous hockey stick look, or the L, rather than a V bottom.
Thanks for the kind comments on the blog. Glad you like it.
Apple Butter sounds really good. I've been making some sour dough bread recently and that apple butter would be great on top of it.
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