Home About Archives RSS Feed

@theMarket: A Week to Forget

Bill Schmick

In last week's market column, I warned readers of an impending decline of as much as 5 percent in the stock markets. I realize that not everyone receives both my columns each week. The important thing to know is that 4 percent of that drop has occurred but we may still have a re-test of the lows. 

Over the last few days I have been making a lot of what I call "hand holding" calls. These conversations are meant to summarize the events in both Japan and the Middle East, explain how we are dealing with this crisis, and answer any questions people may have. I soon discovered that my clients (and people in general) have been subjected to a lot of misconceptions, misinformation and still have many unanswered questions surrounding these crises. So let's try to set the record straight.

"What's going to happen in the Middle East?" asked a local business owner from Pittsfield.

By now you know that the United Nations declared a no-fly zone over Libya on Friday. In response, Libya's foreign minister quickly declared a cease fire, but as of this writing, battles still rage within the country. On the news, both oil and precious metals declined from overnight highs. All three of those commodities have gyrated wildly all week in response to global events.

At the crux of this controversy, investors fear that while Libya is a small player in the oil markets, unrest in the region, whether in Gaddafi land, Bahrain or elsewhere, could spread to Saudi Arabia. Unrest within the Kingdom would jeopardize a much larger piece of the world's energy pie and could cripple global economic growth.

The ruler of Saudi Arabia, King Abdullah, has decided to short circuit any political unrest in his kingdom by buying off the people who count. Friday he announced a multibillion dollar boost in welfare benefits, bonuses for public-sector workers (including the army) and a massive program of new housing. This follows last month's $37 billion giveaway. Some of the money will also be spent on hiring, ahem, 60,000 new "security guards" at the interior ministry just in case this bribe does not appease all of the populace.

My belief is that tensions in the Middle East may continue, but their power to impact world equity markets is diminishing and as they do, the price of oil will slowly sink back to my target of $80-$90 a barrel, which seems a reasonable price for oil, given world economic growth.

Japan's crisis around the Fukushima nuclear plant, on the other hand, is still a wild card. No one knows what will happen in the days ahead. I maintain that, if the worst should occur, it will not have a substantial impact on the United States. The uncertainty, however, will keep world markets volatile for a bit longer.

If I measure this pullback from top to bottom, we have had a 7.01 percent decline. Over the last few days we have been experiencing a relief rally that has reclaimed about 3 percent of that fall. I am not certain that we have seen the lows yet on the S&P 500 Index. We could still test the 1,225-1,235 level if there were to be a nuclear meltdown at Fukushima or an air war with Libyan forces.

None of that changes my strategy and hopefully yours. This is a pull back to be bought. Don't try to catch the very bottom, simply add to your positions on down days. You should have been doing just that this week. I know I have.

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 1-888-232-6072 (toll free) or e-mail him at wschmick@fairpoint.net. Visit www.afewdollarsmore.com for more of Bill's insights.

0 Comments
Tags: oil, energy, Middle East, Japan, nuclear      
News Headlines
Three Vying for Adams Board of Selectmen
Lanesborough EMTs Forgoing Stipends to Save Ambulance Service
Cheshire Finds New Use For Pipeline Funds
Berkshire Medical Center Gets OK to Expand Addiction Treatment
MPO Short On Ready Projects to Spend $2.5 Million
VIM Berkshires Receives Grant from Medical Society Foundation
Berkshire County Arc to Host 22nd Annual Golf Classic
Girls Inc. to Honor Ruth Blodgett at 26th Boraski Celebration Evening
Soldier On Creating Veterans Housing With Citzens Bank Support
Can You Make Your Investments Less 'Taxing'?

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 (198)
Independent Investor (273)
Archives:
April 2016 (5)
April 2015 (1)
March 2016 (8)
February 2016 (5)
January 2016 (5)
December 2015 (6)
November 2015 (6)
October 2015 (9)
September 2015 (7)
August 2015 (7)
July 2015 (6)
June 2015 (8)
May 2015 (6)
Tags:
Stocks Euro Fed Economy Commodities Europe Fiscal Cliff Deficit Interest Rates Election Stimulus Pullback Retirement Housing Debt Ceiling Bailout Energy Stock Market Recession Oil Debt Rally Banks Crisis Federal Reserve Jobs Japan Europe Taxes Selloff Markets Congress Greece Currency Metals
Popular Entries:
The Independent Investor: Don't Fight the Fed
The Independent Investor: Understanding the Foreclosure Scandal
@theMarket: QE II Supports the Markets
The Independent Investor: Does Cash Mean Currencies?
@theMarket: Markets Are Going Higher
The Independent Investor: General Motors — Back to the Future
The Independent Investor: Will the Municipal Bond Massacre Continue?
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: Why Are Interest Rates Rising?
The Independent Investor: How Will Wall Street II Play on Main Street?
Recent Entries:
@theMarket: Markets Hold on to Weekly Gains
The Independent Investor: Leaving your Legacy
The Independent Investor: Have You Had 'The Talk' Yet?
The Independent Investor: Long-Term Care Insurance Can Be Crucial to Your Future
@theMarket: Economy Stronger, Stocks Weaker
The Independent Investor: Long-Term Care Insurance Should Be on Your Agenda
The Independent Investor: Are Negative Interest Rates the Answer?
@theMarket: Fed-Driven Rally Grinds Higher
The Independent Investor: Why Free Trade Has a Bad Rep
@theMarket: Markets Are at an Important Level