Home About Archives RSS Feed

@theMarket: Better Days Ahead

Bill Schmick

After this week you should have either an upset stomach, stress headache or both. Human beings do not do well in markets that climb up and down by over a percent on a daily basis. Unfortunately, as this market bottoms, we may expect more of the same.

On the plus side, the Greek Prime Minister George Papandreou received a parliamentary vote of confidence this week. Yet, facing investors this week is a vote on the passage of the austerity plan that the European Community demands in exchange for bailout money.

Economic data continues to disappoint with the latest unemployment figures coming in more than expected. Wherever you look, gloom and doom pervades the minds and hearts of investors. On Wednesday, Fed chief Ben Bernanke didn't help by reducing the Fed's estimate for GDP growth in the second quarter from 3.1-3.3 percent to 2.7-2.9 percent. Even a 5 percent decline in oil was viewed as negative and simply another proof that the economy is faltering.

Most investors missed the point of Thursday's release of 60 million barrels of crude from the world's strategic oil supply. Pundits complained that it was too little to impact demand since it amounted to less than a day's supply of global demand. Others argued it was an act of desperation by an administration that has run out of ideas to stimulate the economy.

It was none of the above, in my opinion. Readers may recall that a few weeks ago prices of most commodities peaked after the CME raised margin requirements for everything from energy to silver. Speculators, who had bid commodity prices up to astronomical levels, abandoned the market in droves causing prices to decline to their present levels.

Most energy experts believe that the fundamental price where supply and demand for oil are in balance is closer to $85 in barrel. But notice oil, until this week it was still trading at $100 a barrel and above, (although down from its recent peak of $112 a barrel). Clearly, there were still a lot of speculators in the market, who could go either way. It was a tipping point where there was at least a 50/50 chance that traders might try and take the price higher once more.

To me, the International Energy Agency exhibited perfect timing. With a relatively small amount of released oil, they managed to drop the price of crude by $5 a barrel and send the speculators running for the hills. It has also added another element of risk since nervous traders will now have to be looking over their shoulder in case the IEA does it again.

As for the wall of worries that beset the market, all this pessimism is part of the normal process one expects as the averages descend to a level where buyers once again appear. Today we are probably within 1-2 percent of that area, if we are not already there. To me, the math is simple: a possible 50-point decline in the weeks ahead on the S&P 500 Index versus 150-200 points of upside. The risk/reward ratio tells me to not only hold the course but to buy on weakness.

Bill Schmick is an independent investor with Berkshire Money Management. (See "About" for more information.) None of the information presented in any of these articles is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at (toll free) or e-mail him at wschmick@fairpoint.net. Visit www.afewdollarsmore.com for more of Bill's insights.

0 Comments
Tags: silver, oil, commodities, Greece      
News Headlines
North Adams Promotes Three Police Officers to Sergeant
Department of Agricultural Resources Has Tips to Keep Pets Safe This Holiday Season
Rainbow Seniors Hires New Director
Clarksburg Elementary Announces First Trimester Honor Roll
Time to Review Your Investment Strategy for the Year
Carr Hardware Wins Small Business Of The Year Award
North Adams Happenings: Dec. 13-19
PEDA Commits More Funding For Berkshire Innovation Center
North Adams City Council Tours New DPW Facility
Pittsfield Council Critical of Trash Pickup Plan

Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of BMM. None of his commentary is or should be considered investment advice. Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com Visit www.afewdollarsmore.com for more of Bill’s insights.

 

 

 



Categories:
@theMarket (242)
Independent Investor (331)
Archives:
December 2017 (3)
December 2016 (1)
November 2017 (5)
October 2017 (5)
September 2017 (5)
July 2017 (2)
June 2017 (8)
May 2017 (7)
April 2017 (7)
March 2017 (8)
February 2017 (8)
January 2017 (6)
Tags:
Currency Fiscal Cliff Stock Market Stocks Debt Selloff Election Jobs Commodities Economy Markets Congress Retirement Greece Europe Oil Rally Recession Stimulus Wall Street Debt Ceiling Energy Bailout Japan Euro Deficit Europe Federal Reserve Metals Pullback Crisis Housing Banks Taxes Interest Rates
Popular Entries:
The Independent Investor: Don't Fight the Fed
@theMarket: QE II Supports the Markets
The Independent Investor: Understanding the Foreclosure Scandal
@theMarket: Markets Are Going Higher
The Independent Investor: Does Cash Mean Currencies?
The Independent Investor: General Motors — Back to the Future
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: Why Are Interest Rates Rising?
The Independent Investor: Will the Municipal Bond Massacre Continue?
The Independent Investor: How Will Wall Street II Play on Main Street?
Recent Entries:
@theMarket: Should Be Good Month for Stocks
The Independent Investor: Will the Lights Go Out?
The Independent Investor: The Bots Are Coming
@theMarket: Sweet Spot for the Markets
The Independent Investor: Why Stocks Continue to Climb
The Independent Investor: Cracks in the House of Saud
@theMarket: Investors Underwhelmed by Tax Reform
The Independent Investor: Are You Ready for a Down Market?
@theMarket: Markets Are Waiting for Tax Reform
The Independent Investor: IRS Changes Tax Rules for Next Year