Recommended Stocks & Mutual Funds
in the News
Below are updates of our
recommended stocks and mutual funds as well as market news.
11/08/2008
--- Steady Progress In The Credit Markets
The interest rate for bank-to-bank
loans continues to fall. This is a positive sign for the
tight credit markets as it means banks are more willing
to lend to each other. The London interbank offered rate
(Libor) for 3-month loans dropped for the 20th straight
day. The rate now stands at 2.29%. This is the lowest level
in four years. Friday's drop was the biggest one-day drop
since 1992.
November 15 is a common deadline
for shareholders to notify fund managers of their desire
to cash out investments before the end of the year. This
could mean another round of indiscriminate selling by funds,
possibly extending the recent market volatility.
10/26/2008
--- Hedge Funds Could Be Wild Card - YTD Returns
Much of the recent indiscriminate
selling in the stock market may be attributed to hedge
funds. Unlike mutual funds, most hedge funds must make
up for losses before they can charge performance fees.
With the S&P 500 being down 40% year-to-date, some
hedge funds are simply shutting down. The resulting liquidation
of their huge portfolios can cause the market to fall
considerably. If more hedge funds throw
in the towel, indexes could be heading lower. While this
is bad in the short run, it would likely send prices well
below their intrinsic value, creating a great buying opportunity
for long-term investors who have time to ride out the
storm and are dollar-cost averaging into the market. Eventually,
new hedge funds will appear when the markets calm down,
likely reversing the process. The great unknown is when
the markets will bottom.
The Primary Stock Portfolio
is running neck-and-neck with the S&P 500 this year,
making it look like this will be the portfolio's first
down year. In past bear markets, the portfolio has been
able rally late in the year to show a gain for the calendar
year, but that is looking less likely, especially if hedge
funds continue their indiscriminate selling.
We would like to see a
change in the way hedge funds charge performance fees
so that there is no longer an incentive to shut down operations
when the market temporarily heads south. There is a good
chance that more regulation (and criminal convictions)
will be coming in the near future in the mortgage arena.
The hedge fund industry could be the next target for added
government regulation.
10/24/2008
--- Credit Markets Starting To Show Signs of Life
Before the economy can
improve, the credit markets must loosen up. Banks have
recently been leery of lending even to each other, but
this is starting to improve. In the last two weeks, interbank
lending rates have fallen by nearly half, showing that
short-term loans are starting to be made and the credit
crisis could be easing.
10/20/2008
--- Warren Buffett Explains Why He is Buying, Why The Stock
Market Will Improve Well Before the Economy Improves, &
Why Cash Is Currently a Terrible Long-term Asset
Warren Buffett, the greatest
investor of our time, is buying stocks. His simple rule:
"Be fearful when others are greedy, and be greedy when
others are fearful."
He also explains why the
stock market will rebound before the economy improves and
why cash is not currently a good long-term
investment. While everyone needs cash to meet short-term
needs, we couldn't agree more.
I don't want to paraphrase
his thoughts too much, therefore I highly recommend reading
his article, which can be found here
(opens new window).
